Below, we look at the degree to which investment income (a function of bond yields, and the idea of positive returns to float) can drive the insurance sector NPAT.

Here’s MPL, note the near halving in investment income, as yields collapsed post the pandemic.


In other notes we’ve explored mathematically more rigorous methods, to convey that the sector has material leverage to rising rates (rolling regression analysis of stock returns against the shape and slope of the yield curve).

But simply looking at the degree of investment income, by stock, over time does a perfectly reasonable job too. For QBE, higher investment income means material upgrades to earnings, should higher rates prove even modestly enduring.


Note that Suncorp has a bank attached, although of course bank sector NIM’s are positively correlated to higher rates too.


Whilst we are underweight the banks, we’ve a) narrowed the gap, and b) have plenty of insurance exposure in the portfolio. As such, we are well positioned should higher rates stick around.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

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