Is Suncorp Group Ltd the best insurer to buy in 2017?

In the last month the insurance sector has been one of the best performing areas of the Australian share market.

The three big insurers Suncorp Group Ltd (ASX: SUN), Insurance Australia Group Ltd (ASX: IAG), and QBE Insurance Group Ltd (ASX: QBE) have each provided shareholders with market-beating returns of 11.5%, 8%, and 13% respectively.

During the same period the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has climbed a solid 4%.

In light of this I would expect many investors will wonder whether it is too late to invest in these insurers now. Well the good news is that I don’t believe it is too late to invest in one of them – Suncorp.

At just 14x FY 2017’s estimated earnings I believe Suncorp is still great value for an investment today. Whereas IAG and QBE at 17x and 18x estimated FY 2017’s earnings, respectively, are starting to look a little expensive in my eyes.

Another bonus with an investment in Suncorp at this stage is that its shares are expected to provide investors with a fully franked 5.5% dividend in the next 12 months according to CommSec.

Not only does this smash term deposits, high interest accounts, and the market average, but it also betters the yield on offer from IAG and QBE. Its rivals are expected to provide fully franked 4.7% and 4.1% dividends in the year ahead.

Finally, another reason I would invest in Suncorp is its new operating model. The One Suncorp strategy is an integrated, customer-centric model which enables customers to choose from any products provided across its wide ranging brands through its online marketplace.

Supporting the initiative will be the launch of the company’s first concept store in Parramatta this month, with two flagship stores to follow in Brisbane and Sydney. These stores look and feel more like Apple stores and I’m optimistic that they will be a big success.

All in all I would class Suncorp as a buy at the current share price and expect it to outperform its peers in 2017.

Finally, if you already have exposure to the insurance industry then in order to maintain a diverse portfolio I would suggest an investment in this high-yield dividend share instead. I'm tipping it to be a big winner next year.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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