Insurance Profits Rise As Claims Also Rise

For years, insurance investors have experienced little gains with their ventures. But it seems that things are looking up this year, as seen in the rise of share prices to as much as 20%.

Conditions all around reflect signs of improvement. For instance, Suncorp has enjoyed a plum profit at $574 million, half of more than what was expected. IAG, the competing company, reported a $461 million net earnings, as well as the doubling of its dividends.

Analysts say, insurance companies are about to enter a new high, which could have a positive effect on the QBE’s results next week. Some experts, however, are still holdng off and questioning whether or not this new trend is going to become sustainable.

Says an analyst at Bank of America Merrill Lynch, ”Profitability simply does not get any better than this, at least not sustainably.” The latest improvements could only be a reflection of peak earnings and a closer look at IAG’s share price, for instance, already indicate that it’s over and above its book value, which is at its highest for the last five years.

It should be worth noting that even with these changes, insurance companies have not had much luck with natural disasters, which is why costs and claims continue to rise even when conditions are in the industry’s favor.

While investment returns are mainly boosted by an optimistic sharemarket, experts say premiums could still increase to as much as 10% this year. This move should help boost the industry’s earnings, but some analysts are still saying it’s best to practice caution and avoid consumer activism.