Australian General Insurance Sector Update

Submitted by Craig Strzelecki on 26 May, 2007 - 19:14

Sharemarket analyst, UBS has provided an Australian general insurance sector update. Insurance services inflation down 0.1% in the March quarter: While the decline in Q107 follows a 0.5% fall in Q406, the index is still up 2.4% on pcp. The index tracks the gap between gross premiums paid and claims incurred, and is akin to a gross margin for domestic personal lines. The bulk of the insurance index covers comprehensive home and contents, comprehensive motor and CTP. Data for each of these product lines is not available. Consistent with static margins: Today's data are broadly consistent with static margins in the past couple of quarters. The analyst notes however, that these data are not seasonally adjusted, and a seasonal pattern cannot be ruled out at this stage. These data do not address claims frequency. Cost pressures in motoring lines ease, on average: After the Q406 CPI, they noted that the insurance CPI data were consistent with solid industry profitability in personal lines, with the upturn in motoring costs worth watching. In the analyst's view, the Q107 data does not alter these conclusions, aside from providing slightly more comfort on costs. The analyst continues to favour QBE and IAG with both having Buy 2 broker call: Among the general insurers, they continue to favour QBE