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Investments: brokers hold edge over insurers

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Listed brokers are poised to outperform their rivals in the coming months as the rate cycle eases from recent peaks, Macquarie Research says in a new report.

Macquarie has kept its “underperform” call on IAG and Suncorp and “neutral” on QBE ahead of the release next month of their earnings results.

In the home market, where premium rates are up about 3.1%, the broker channel is holding on to growth of 7.6%, well above that of the 2.6% seen in other channels.

Using proprietary survey data, premium rates for new home insurance policies sold through the online channel increased 4.9% in the December quarter from a year earlier. Online sales account for about 17% of home insurance policies, Macquarie says, while another 41% of policies are made through call centres.

IAG-owned brands are achieving rate gains of about 6.8% for new home policies sold online, higher than the 2.8% Suncorp brands have imposed.

“Our pricing analysis provides a strong lead indicator for the investment case of listed insurance brokers,” Macquarie says in the report.

“Company-specific factors give us the confidence behind the continued preference for brokers over insurers.”

In the commercial segment, prices moderated to 5.4% in the December quarter from 9.9% a year earlier, according to the Macquarie Commercial Premium Rate Index.

Macquarie estimates Steadfast, the largest listed broker group, will achieve average price rises of 5.3% and AUB 4.7% in the second quarter of this year.

In a separate report on Suncorp, Macquarie says the insurer’s earnings outlook remains weak, citing “further downwards repricing” pressure in its NSW and SA compulsory third party portfolios.

“We continue to see earnings headwinds for Suncorp which provide risk to consensus estimates,” according to the report released yesterday.