Insurers are often in demand for investors seeking security and income, and fortunately the ASX has a wide range of insurers to choose from. Here’s my take on a few of the biggest:
Insurance Australia Group Ltd (ASX: IAG)
IAG primarily sells home, contents, and motor insurance and is one of the largest players in the ANZ region. The company also has a selection of businesses throughout south-east Asia, but they are not meaningful contributors to earnings. Quota-share agreements have reduced the company’s risk substantially, although share prices have soared, perhaps expecting capital returns (like dividends) due to the group’s lower capital requirements. With a dividend yield less than 5%, I think IAG looks expensive relative to peers.
QBE Insurance Group Ltd (ASX: QBE)
QBE has a long history of mis-steps and poor decision making regarding entrance into new markets, something that has held the company back for years. The repair period has been long and painful for shareholders, but the upside is that QBE looks like most of its problems are behind it, it’s globally focused, and it’s about 30% cheaper than peer IAG. I’m interested in QBE at today’s prices.
Medibank Private Ltd (ASX: MPL)
Medibank is a healthcare insurer with no natural disaster (cyclone etc) exposure, making it an interesting choice for those who don’t want their dividends to depend on the vagaries of the weather. Unfortunately like IAG, I think Medibank is potentially overpriced, especially in context of continued market share losses to competitors like Bupa and NIB Holdings Limited (ASX: NHF).
CBL CORP FPO NZX (ASX: CBL)
A small NZ-based construction and niche insurer, CBL Corp has a complicated business and is expanding gradually into markets like India and the USA, which bring equal parts opportunity and significant risk. I really like CBL, but its business is complex, it doesn’t pay much of a dividend, and expansion into new markets could carry significant risk if rushed. As a result I think CBL Corp is probably unsuitable for most investors looking to own a reliable insurer.
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Motley Fool contributor Sean O'Neill owns shares of CBL Limited. The Motley Fool Australia owns shares of CBL Limited and Insurance Australia Group Limited. 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.