The Suncorp Group Ltd (ASX: SUN) share price has grown by 9.2% over the past two months, is it a buy today?
Buy case
Suncorp is one of the most diverse financial businesses on the ASX.
It has large retail bank operations which rival other regional banks like Bendigo and Adelaide Bank Ltd (ASX: BEN) and Bank of Queensland Limited (ASX: BOQ). It also has a diverse array of insurance brands like AAMI, Bingle and Terri Scheer. This diverse strategy means it could be a better choice than either Bendigo Bank or Insurance Australia Group (ASX: IAG).
The insurance industry has apparently been able to start increasing its premiums because there isn't a 'newcomer' trying to steal market share with lower prices like Youi was doing up until recently. These hikes are also off the back of storms that hit Queensland and New South Wales.
Suncorp had a pretty good year in FY17 with both the top line and net profit after tax (NPAT) growing by 3.6%, the dividend grew by 7.4%
Finally, Suncorp has a very attractive dividend for income seekers. It's currently trading with a trailing grossed-up yield of 7.32%.
Sell case
Suncorp doesn't have huge control over its profits. In any year a huge storm could roll into Brisbane and cause hundreds of millions of dollars' worth of damage. These storms appear to becoming more damaging and frequent in recent times, which hurts insurers.
The effects of automated cars in the long run are predicted to significantly decrease insurance premium costs. If Suncorp maintains the same profit margin, then this would represent a large decrease of revenue and profit for the motor division.
Foolish takeaway
The valuation isn't too costly, with shares currently trading at 16x FY18's estimated earnings.
Suncorp could be a decent choice for investors purely looking for income, I just think that there are better choices on the ASX.
