The insurance industry is, fairly or unfairly, perceived as a boring sector to invest in.
But in turbulent economic times like this, investing in ASX insurance shares is not a bad idea.
The thesis is that it's a service that consumers and businesses will see as essential even through tougher periods. Moreover, insurance companies earn better returns on all the collected premiums when interest rates are higher.
The team at Ophir holds a couple of insurance positions that experienced vastly different reporting seasons. But they have long-term faith in both S&P/ASX 200 Index (ASX: XJO) stocks:
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Strong February, strong future
In a letter to clients, Ophir portfolio managers Steven Ng and Andrew Mitchell revealed that insurance broking giant AUB Group Ltd (ASX: AUB) reported one of the portfolio's best results last month.
"It beat its half-year result and upgraded full-year earnings guidance," the letter read.
"Even more importantly, the insurer upgraded its medium-term margin expectations for most business lines."
The market responded in kind, sending the stock price 14.55% higher during February.
Ng and Mitchell like how AUB's management is running the business.
"The CEO Mike Emmett has been doing a great job turning around underperforming brokers and integrating their large acquisition last year of the UK-based Tysers business."
It seems the Ophir team is not the only one bullish on AUB. According to CMC Markets, 11 out of 12 analysts that currently cover the stock recommend it as a buy.
Stunningly, 10 of those professionals deem the shares as a strong buy.
The AUB share price has gained 18.5% over the past 12 months while paying out a 2.16% dividend yield.
Short-term bumps on a long-term journey
On the other side of the coin, NIB Holdings Limited (ASX: NHF)'s financial update was not as impressive.
"NIB Holdings, the private health insurer, clocked a small miss on its earnings result," read the Ophir letter.
"Its core private health insurance business was a little behind as claims continue to normalise post-COVID."
Ng and Mitchell noticed that a side business was doing pretty well, though.
"Uptake of their travel insurance business is performing well on the back of continued economic reopening."
Unfortunately, the NIB share price has declined almost 10% year to date.
The Ophir portfolio managers reminded investors that a long-term investment view is critical for a business like NIB.
"Long term, we continue to like management's ability to deploy capital into new areas, such as its recent acquisition of plan managers who administer the National Disability Insurance Scheme (NDIS)."
Mitchell and Ng's peers aren't quite as convinced about NIB. Eight out of 13 analysts surveyed on CMC Markets rate the stock as a hold.
