The NIB Holdings Limited (ASX: NHF) share price has been a strong performer on the ASX 200 over the last three months.
Since hitting a 52 week low of $4.64 on December 11, the private health insurer's shares have rallied an impressive 27% higher.
Can this strong run continue?
One broker that isn't sure that this strong run can continue is Goldman Sachs.
According to a note out of the investment bank this morning in relation to the Australian insurance industry, its analysts have downgraded NIB's shares to a sell rating from neutral.
The broker made the move largely on valuation grounds after the company's shares rallied around 10% higher than its price target of $5.48.
In addition to this, its analysts remain reasonably bearish on the health insurance industry.
This is due to concerns over a number of challenges that the industry faces in the coming months. These include the pre-election release of the terms of reference for the Labor party's Productivity Commission, the outcome of the Federal election and industry design/implementation of the premium-cap, and the initial draft of APRA's new PHI capital standard.
Goldman suspects that these will be a negative for NIB and rival Medibank Private Ltd (ASX: MPL) and could weigh on margins and lead to a revision of their medium term strategies.
In light of this, the broker feels that the valuations of both these companies are once again looking stretched. Incidentally, Goldman has a sell rating and $2.48 price target on Medibank's shares.
Which insurance share does Goldman Sachs like?
The broker's preference in the insurance industry right now is Suncorp Group Ltd (ASX: SUN). It has a buy rating and $14.65 price target on the insurance giant's shares due to margin expansion opportunities and an attractive earnings per share growth outlook.
