The Suncorp Group Ltd (ASX: SUN) share price could have compelling upside, according to brokers.
Suncorp is one of the largest insurance businesses in Australia, along with Insurance Australia Group Ltd (ASX: IAG). There are a few positives to like about the business, including its potential earnings.
Let's get into why the insurance business is attracting analyst attention.
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Double-digit return potential
The broker UBS has a buy rating on Suncorp shares, with a price target of $20.85 on the business.
A price target is where the broker thinks the share price could get to in 12 months from the time of the investment call. Therefore, at the time of writing, UBS is suggesting the Suncorp share price could rise by 17% over the next 12 months. If that happened, it would very likely be a market-beating return.
After a painful five months to November 2025 due to large natural hazard costs, December was a calmer month for weather events. Even so, costs were well above its $885 million first-half allowance. UBS has forecast a catastrophe budget overrun of $420 million for Suncorp (down from $580 million).
UBS said that Suncorp is "benefitting from a more benign December for CATs."
Across the sector, it prefers domestic general insurance exposures reflecting:
(1) likelihood of sustained personal lines rate momentum post elevated Oct/Nov domestic CAT activity, (2) consensus upside from RI [reinsurance] profit commissions for IAG, (3) support from rising bond yields, and (4) scope for ongoing capital management given strong balance sheets.
With a large float portfolio and significant portion of money invested in bonds, higher bond yields can help the company generate stronger returns for Suncorp, helping its bottom line.
What is the Suncorp share price valuation?
The forecast on CMC Markets suggests the business could deliver growing earnings per share (EPS) between FY26 to FY28.
Currently, the forecast is that the business could generate $1.14 of EPS in the 2026 financial year. That means the Suncorp share price is valued at under 16x FY26's estimated earnings. The projections suggest EPS could rise by another 11% by FY28.
In terms of the dividend, the projection on CMC Markets suggests the business could deliver an annual dividend per share of 78.5 cents. At the current Suncorp share price, it could pay a grossed-up dividend yield of 6.3%, including franking credits.
Excitingly, the projections suggest the payout could rise to 88.5 cents per share in the 2027 financial year and 92 cents per share in the 2028 financial year.
