Over the last 12 months the Suncorp Group Ltd (ASX: SUN) share price has been one of the better performing blue-chips with an 18% gain.
This return stretches to over 23% when you factor in the insurance and banking giant's fully franked dividend.
Is it too late to invest in Suncorp?
While I wouldn't necessarily expect to see this level of return over the next 12 months, I do believe that Suncorp's shares have the potential to beat the market in 2018.
I was very pleased with its recent first-quarter update and felt that it showed positive signs that its One Suncorp strategy is working well and delivering on expectations.
The highlight of the quarter in my opinion was the 2.4% lift in gross loans from its banking business thanks partly to strong home lending and improved capability and retention, and simplified processes. Pleasingly, Suncorp achieved this while maintaining its commitment to responsible and sustainable lending practices.
I expect more of the same in the following quarters, which should put Suncorp in a position to deliver solid earnings growth and consider another increase to its generous dividend.
At present Suncorp's shares provide a trailing fully franked 5.2% dividend.
What are the risks?
As with all banks, the major risks involve rising bad debts and a housing market crash. Thankfully there are no signs of these occurring in the short-term, which I expect will mean further solid growth for its banking business in FY 2018.
For its insurance business there is always a danger of a catastrophe causing a sharp rise in claims. But considering management's experience in this, I would expect it to be sufficiently reinsured for such an event.
Foolish takeaway
All in all, I believe the risk/reward on offer with Suncorp is favourable at this point and would suggest investors consider it above insurance rivals QBE Insurance Group Ltd (ASX: QBE) and Insurance Australia Group Ltd (ASX: IAG).
