Insurers’ half-year financial reports have prompted many investors to turn from banking shares to insurance stock, according to analysts.

The latest value surge was pushed along last week by Promina, whose June-half report last week showed better than expected results – and dividends. The insurer reported a net profit of $204 million, beating industry forecasts by $28 million.

Following the announcement, Promina shares surged to a new record. National Australia Bank was down 1.2%, leading the banking sector lower. And IAG shares rose 1.2% last week to just over $5.

Industry traders have noted the banking sector will underperform in 2005 and margin pressure will remain an issue.  JP Morgan analyst Shane Fitzgerald says insurance companies such as Promina and Suncorp have announced record figures that have attracted investors.

But he told Sunrise Exchange News the sustainability of such profit levels is questionable. “Suncorp and Promina have posted record figures but it will be harder to earn growth off those record figures. The market is now more competitive, as they have been trying to gain more market share.”

KPMG insurance partner Andries Terblanche says the insurance sector’s recent good underwriting results have been an incentive for investors. “While bank stocks have historically outperformed insurance, the insurance market is enjoying a purple patch, and this has seen investors keen to move to the area.”

Mr Terblanche says it is important for the industry not to allow a cyclical situation to occur and for underwriting results to continue.

“The million dollar question is whether the industry will adhere to good underwriting principles. If so, stock will remain attractive to investors.”