Insurance Australia Group Limited

While Suncorp’s dividend yield when compared with the major banks is on the low end, it is comparable with its listed insurance peers including Insurance Australia Group (ASX: IAG) which is yielding nearly 4% and QBE Insurance (ASX: QBE) which is yielding just over 3%. Given the hardening insurance premium outlook there is scope for earnings and dividends to improve here.

Suncorp also took the opportunity to update the market on the state of natural hazard claims. Over the nine months to 31 March the general insurance division took a hit with claims reaching $537 million against an allowance of $520 million. This was largely due to the damage caused by ex-Tropical Cyclone Oswald which is currently estimated at a staggering $250 million in claims to Suncorp. The weather events certainly haven’t damaged the share price growth of the domestic insurers, with market-beating returns from the domestic-focussed insurers over the past 12 months. Suncorp, Insurance Australia Group (ASX: IAG) and AMP (ASX: AMP) have all significantly outperformed the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) as displayed in the chart below. Meanwhile the share prices of New Zealand based insurer Tower (ASX: TWR) and global insurer QBE Insurance (ASX: QBE) have both underperformed.

Over the last 12 months, it has been the large, well established companies that have attracted investors en masse. Investors have flocked towards companies such as the big four banks, the two supermarket behemoths and Insurance Australia Group (ASX: IAG) in search of high dividend yields and a safe haven from economic turmoil overseas.