It sure has been a great time to be a shareholder of one of Australia's leading insurers. In the last month each has outperformed the rampaging S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) by some distance.
Of the three major insurers QBE Insurance Group Ltd (ASX: QBE) has been the pick of the lot with its 25% gain. This came largely as a result of a jump in bond yields in the United States.
The company reinvests the majority of its foreign earnings in U.S. government bonds. So with yields rising QBE is at long last about to enjoy a higher return on its investments.
Next was Suncorp Group Ltd (ASX: SUN) with its 12.5% gain, followed by Insurance Australia Group Ltd (ASX: IAG) with a 9% increase in its share price. Much of IAG's gain came yesterday following its positive market update.
But can these gains continue?
Following this rally I feel QBE and IAG look fully valued now at 19x estimated FY 2017's earnings. Whereas Suncorp at just 15x estimated forward earnings still looks to be great value in my eyes.
Another big appeal with Suncorp in my opinion is its huge dividend yield. Its shares are expected to provide a fully franked 5.5% dividend in FY 2017 according to CommSec. This is far greater than QBE and IAG which are expected to yield 4% and 4.6% respectively.
Furthermore, I expect the company to see a big improvement in its performance thanks to its "One Suncorp" strategy. The strategy includes opening up all of its brand's products through its online marketplace and the launch of its first concept store in December.
All in all, despite the rally in the last month, Suncorp still looks like a buy to me at the current share price.
