The SUN result is despite a modest miss relative to consensus ($681 actual, vs $688 expected).

The long thesis has been a) inflation hedge due to pricing power conferred by a strong industry structure b) cyclical tailwind from global premium hardening cycle.

That certainly comes through in the below, which depicts price and volume outcomes.

And looks arguably more dramatic by business line, over time, in absolute terms.

Loss rates, and claims ratios were excellent, putting the cat claims to one side (the supposedly “rare” flood events).

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The banking arm returning to growth with solid loan underwriting outcomes, which helps to underpin the right timing for the exit strategy (sale to ANZ).

Overall, margins are expected to climb (see midpoint of guided margin below) given higher future investment income from higher yields, and ongoing premium increases, offset only modestly by higher reserving requirements due to natural catastrophe claims and reinsurance.

Overall, we are happy enough.

The outlook is good, and given our concerns around the broader Australian market (valuation of secular growth stocks, the outlook for consumer discretionary names, our bearish views on commodities) that outlook is good enough, particularly if they can get the ANZ bank sale away, which we think they will.

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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