As we approach August reporting season do you see one stock or sector that could surprise to the upside or downside

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As we approach August reporting season do you see one stock or sector that could surprise to the upside or downside? David Poppenbeek, Head of Australian Equities, K2 Asset Management says IAG and SUN are on track to exceed guidance. The sector which we believe should surprise on the upside is insurance; in particular the domestic general insurers. We feel that both IAG and SUN should deliver some growth in premiums but should outperform expectations in claims expenses. Australian weather conditions for the 6 months to June have been very favourable for insurers. In addition, the top four Australian underwriters of home and automotive insurance control more than 80% of the market thus leading to rational pricing behaviour. As a result we believe that both companies are on track to comfortably exceed their respective guidance for insurance margins in FY2014; IAG at 14.5% to 16.5% and SUN above 12%.


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