Two of Australia's largest insurers have had a tough couple of months following massive storms in Sydney and Brisbane that resulted in claims above what both Insurance Australia Group Ltd (ASX: IAG) and Suncorp Group Ltd (ASX: SUN) have allowed for.
Claim information from the Brisbane storms hasn't been released yet, but IAG advised shareholders in late April that the group's 30,000 NSW claims would cost $250 million and it downgraded its full-year insurance margin guidance forecast from 13.5-15.5% to just 10.5-12.5%. Suncorp advised that the 25,000 claims received would cost the company around $200 million, but did not revise its full-year guidance.
Dividend question marks?
The question now is what impact will it have on dividends and does the recent share price fall represent a buying opportunity. Analysts are predicting a payout of 92 cents this year, 90 cents next year and 88 cents the year after for Suncorp, representing a yield of over 7%!
IAG meanwhile, is predicted to payout 31 cents this year, 32 cents next year and 32.5 cents the year after – down from 39 cents last year as a result of the recent storms. IAG's dividend yield of 5.7% fully franked is down significantly from last year's 7% and is symptomatic of the risk investors face when buying shares in insurance companies.
The other big insurer on the ASX, QBE Insurance Group Ltd (ASX: QBE), is in a slightly different position to IAG and Suncorp. After years of above-average claims that pushed down profit and dividends, QBE's management appears to be turning the slowly-moving ship around. Analysts are expecting a payout of 40 cents this year, 49 cents next year and over 54 cents in 2017!
While this represents a yield of only 3% at the moment, it's growing quickly and could once again reach the lofty heights of 65 cents or higher reached only a few years ago.
