Investors looking for S&P/ASX 200 Index (ASX: XJO) shares operating in a "sweet spot" may want to run their slide rules over the health insurance sector.
That's according to Nigel Pittaway, managing director, insurance and diversified financials research at Citigroup.
While many companies are coming under pressure with soaring inflation, Pittaway says Aussie insurers are managing the consumer price rises well.
Two ASX 200 shares that are inexpensive right now
As The Australian reports, QBE Insurance Group Ltd (ASX: QBE) is Pittaway's favoured pick.
He said that while the insurance giant will likely only see a gradual improvement in its performance, the company has made good progress in improving its top line and margins.
Analysing the ASX 200 share, Pittaway said:
While we are slightly wary about its US expansion plans, it seems to be taking a sensible approach, and we recognise the CEO's previous experience in this market. On our estimates, the stock continues to look inexpensive especially on FY23E [financial year 2023 estimated] earnings and FY24E earnings.
Health insurers broadly "continue to be in a sweet spot with seemingly not much likely to derail this near term," he said.
Another ASX 200 share Pittaway singled out is Medibank Private Ltd (ASX: MPL). He said Medibank looks to be a stronger play than some of its competitors due to its better capital position and the likely relative trajectory of private health insurance margins.
How have QBE and Medibank been tracking?
Both ASX 200 shares are also sought out for their dividend payouts.
QBE pays a current trailing dividend yield of 2.4%, fully franked. And Medibank pays a 3.6% fully-franked trailing yield.
Both insurers have also bucked the wider selling trend this year.
The QBE share price is up 1.85% in 2022 so far. While Medibank shares have gained 3.8% since the opening bell of the trading year. That compares to a 10% year-to-date loss posted by the ASX 200.
