The hail storm that hit Sydney late last year made a lot of headlines, but has not changed our fundamental view that insurance is an attractive sector in the current environment. Losses from weather events are part and parcel of running an insurance business. While they introduce profit volatility and... Show More
Nufarm is an Australian company that specialises in chemical crop protection globally. It produces products to help farmers protect their crops against damage caused by weeds, pests and disease. Show More
Last week, I presented a stock idea at the Future Generation Investment Forum. Despite being the biggest beneficiary of the oil and gas industry investing to maintain its wells, this company trades on just a PE of 12x. Here, I outline why WorleyParsons could be set to soar as the... Show More
Thanks Mr T. Insurance is an inherently volatile business with reasonably opaque disclosures. However, these characteristics are already reflected in the valuations of stocks like IAG and SUN, which is one of the reasons why they don’t trade at similar multiples to other oligopolistic industries like supermarkets. Our current view is that when comparing the insurance sector to the ASX200, we believe it is in a relatively more attractive position than it has been historically given a stronger revenue and earnings growth outlook than many other sectors in the market. It is true that we will see some mark-to-market investment losses on the equity and corporate bond portfolios of IAG and SUN at the upcoming results. However the ongoing profitability of the insurance business is to a large extent protected by the fact that both insurers match the duration of their bond portfolios to the duration of their claims liabilities, so that interest rate movements have similar impacts on both sides of the balance sheet. Management disclosures on investment portfolios have also improved markedly over the past decade so we at least have some information on the split of investments across asset classes and credit rating bands.