Both IAG and QBE’s warning on the growing losses from catastrophes last week have not changed rating houses’ views on the insurers.

Lonsec Senior Equity Strategist Bill Keenan says the research house has maintained a negative view on IAG, QBE and Suncorp for a number of years.

“We have avoided the insurance industry for a good four or five years,” he told insuranceNEWS.com.au. “They are not generating a good return for Australian investors.”

Lonsec uses the ratings to build model portfolios, which are then used by financial advisers for their clients.

Mr Keenan says the insurers suffered during the global financial crisis and more recently from the increasing number of natural disaster claims.

“When you put these things together, it is not a great environment for insurers,” he said. “We don’t take in the story that they cap risk through reinsurance and that they will increase their premiums to counter losses.

“Governments don’t like premium increases, so we don’t buy the premium increase story.”

Mr Keenan argues investors will obtain a better return placing their money with Australian bank stocks rather than insurers.

“Insurers are just a trading play,” he said. “We avoid insurance, steel, aviation and media – all are doing it tough at present.”

UBS has issued a market report on the insurance sector in which it has maintained a neutral position on IAG and Suncorp, but a “buy” on QBE.

Standard & Poor’s (S&P) has maintained its A+/Stable rating on IAG after last week’s announcements.

The ratings agency noted IAG’s disclosure that it will be taking a $365 million hit on its UK insurance business.

“The UK business accounts for about 10.5% of the group’s premiums and has seen a worsening bodily-injury claims experience,” the report obtained by insuranceNEWS.com.au said.

“While capitalisation remains very strong, this issue in conjunction with recent storm activities does constitute some reduction in flexibility for further material adverse developments at the current rating level.”

S&P has criticised IAG for taking so long to realise the extent of its UK losses, but expects the problem will be fixed by reinsurance and increased premiums.

But the agency notes IAG’s Australian and NZ business is on track to ensure “good medium-term profitability”.