2021-09-03-Credit_Suisse-澳大利亚_对所有一般保险公司和中间人持积极态度_52页_1mb

Australian Insurance Summary

Core Content

This summary provides an analysis of the Australian insurance sector's performance during the reporting season, highlighting the key financial outcomes, margin trends, balance sheet health, and investment outlook for major listed insurers and brokers.

Main Points

1. Top Performers and Ratings

• QBE is the top pick with strong earnings momentum, leverage to the hard market, and value appeal.
• SUN, IAG, SDF, AUB, MPL, and NHF are rated Outperform, with NHF receiving a Neutral rating due to valuation concerns and ongoing travel headwinds.
• The revised order of preference is: QBE, SUN, IAG, SDF, AUB, MPL, NHF.

2. Earnings and Margin Trends

• Premium rate increases are the primary driver of top-line growth, with brokers showing stronger volume growth than insurers.
• Margins are improving for listed insurers, with QBE leading the way with a 200bps improvement.
• SUN delivered a strong FY21 result, with a 7% cash earnings beat and improved margins.
• IAG showed underlying improvement in the IIA portfolio, with a clear path to margin expansion.
• SDF continues to benefit from strong execution and industry tailwinds, including the acquisition of Coverforce.
• AUB is executing well on key initiatives and has a strong growth runway, with a 10% premium to the XSI.
• MPL is seeing improved performance in Health Insurance, with a 50bps margin step-up and strong market share gains.
• NHF is facing headwinds from international students and travel insurance, but its core business remains strong.

3. Balance Sheet and Capital Management

• Balance sheets remain healthy, with no significant changes in capital.
• SUN announced a $250mn on-market buyback, indicating strong capital management potential.
• Brokers have ample capacity for further acquisitions.
• IAG and QBE are cautious about capital management due to ongoing uncertainty around COVID provisions.

4. Investment Earnings

• Investment earnings are stable, with GI's and PHI's benefiting from strong equity market returns.
• Fixed income yields are likely to have bottomed, with upside potential.

5. Earnings Changes and Forecasts

• Overall, earnings forecasts for FY22E and FY23E have been upgraded for most insurers.
• QBE saw the largest increase in its FY21E Cash NPAT (27%), with further growth expected.
• SUN and IAG also had significant upgrades in their earnings forecasts.
• MPL and NHF experienced some downgrades, particularly due to travel-related headwinds.
• The target price for QBE was increased to A$15.60, while SUN and AUB also saw target price increases.

Key Information

QBE

• Rating: Outperform
• Target Price: A$15.60
• Performance: Strong 1H21 result with a 32% EPS beat, improved margins, and strong value appeal.
• Outlook: Continued margin expansion and earnings momentum.

SUN

• Rating: Outperform
• Target Price: A$13.91
• Performance: Strong FY21 result with 7% cash earnings beat, improved margins, and significant capital management potential.
• Outlook: Continued growth and margin expansion, with a clear path to FY23 targets.

IAG

• Rating: Outperform
• Target Price: A$5.90
• Performance: Underlying improvement in IIA, strong cash earnings, and improved dividend.
• Outlook: Expected to catch up with the sector over the next year.

SDF

• Rating: Outperform
• Target Price: A$5.30
• Performance: Strong FY21 result and clear path to growth, with the acquisition of Coverforce.
• Outlook: Continued strong execution and industry tailwinds.

AUB

• Rating: Outperform
• Target Price: A$25.70
• Performance: In-line FY21 result with strong growth in BizCover and broking.
• Outlook: Strong growth runway and low gearing.

MPL

• Rating: Outperform
• Target Price: A$3.70
• Performance: Strong Health Insurance performance, improved margins, and market share gains.
• Outlook: Continued growth in PHI, with potential for margin expansion despite travel headwinds.

NHF

• Rating: Neutral
• Target Price: A$6.70
• Performance: Missed FY21 earnings due to travel and international student headwinds.
• Outlook: Fair value at current levels, with potential for recovery once borders reopen.

Investment Views

• QBE is the top pick due to strong earnings momentum and leverage to the hard market.
• SUN, IAG, SDF, AUB, MPL are all rated Outperform with positive outlooks.
• NHF is given a Neutral rating due to its valuation and ongoing travel headwinds.

Summary

The Australian insurance sector is showing positive momentum, driven by premium rate increases and improving margins. QBE is the standout with the strongest earnings growth and value appeal, while SUN, IAG, SDF, AUB, and MPL also show strong performance and growth potential. NHF faces some challenges but remains a fair value investment. The sector is expected to continue its growth and margin expansion over the next few years.