Floods not seen for decades have affected the northern coast of NSW and parts of Sydney. While not suggesting the current circumstances are a maximum event for insurers, UBS takes the opportunity to reassess the reinsurance and weather-related exposure of domestic insurers over FY21.
Suncorp can absorb a maximum large event, while two could result in FY21 earnings downgrades of -3-5%, the broker assesses.
UBS notes Suncorp has done a lot of heavy lifting in recent years to increase its natural hazard allowances. This has come at the cost of the underlying margin. Nevertheless, the company’s efforts should assist in minimising the weather-related downgrades that have occurred over the last decade.
Buy rating and $11.15 target are unchanged.
Sector: Insurance.
Target price is $11.15.Current Price is $9.92. Difference: $1.23 – (brackets indicate current price is over target). If SUN meets the UBS target it will return approximately 11% (excluding dividends, fees and charges – negative figures indicate an expected loss).
