Australian general insurers are structurally positioned to outperform during a broad market sell-off, supported by stable demand, sturdy cash flows, and mandatory insurance requirements, Jefferies said in a note on Monday.
The sector, known for its defensive characteristics and low volatility, is moderating from a period of rapid premium rate increases and rising US and Australian bond yields.
Jefferies remains optimistic on the sector, banking on the defensive nature of domestic retail books, reinsurance protections, and higher bond yields.
QBE Insurance Group (ASX:QBE) is seen as having the most leverage to rising interest rates, with a 1% increase in underlying yields significantly boosting earnings, as a large portion of its profits comes from investing insurance funds.
Jefferies has a buy rating on QBE and raised its price target to AU$26.25 from AU$25.55.
The investment firm further maintained the buy rating for Iinsurance Australia Group (ASX:IAG) with a raised price target of AU$8.75 from AU$8.50, and kept its hold rating on Suncorp (ASX:SUN) with a higher price target of AU$18.40 from AU$17.70.