Are Suncorp shares a buy after its FY23 results?

Suncorp Group Ltd (ASX: SUN) shares are having a good session.

In afternoon trade, the insurance giant’s shares are up 1.5% to $13.75.

Why are Suncorp shares rising?

This gain may have been driven by a broker note out of Goldman Sachs this morning, which reveals that its analysts remain positive on the company following its FY 2023 results.

According to the note, the broker has retained its buy rating and $15.13 price target. This implies a potential upside of 10% for investors over the next 12 months.

And with Goldman expecting a fully franked 5.5% dividend yield in FY 2024, this increases the total potential return beyond 15%.

What did the broker say?

Goldman notes that Suncorp’s result came in ahead of its expectations in FY 2023. It said:

Overall result and cash earnings in line with consensus and slightly ahead of GSe: FY23 came in at A$1,254m vs. GSe of A$1,240m (SUN consensus of A$1,254m). The 2H23 result was A$666m v GSe of A$652m – beat of 2% v GS (in line with consensus of A$666m). At a headline level v GS, this was driven by a miss on the bank, largely reflecting NIM pressure and a softer underlying & reported margin v GS more than offset by a beat from life insurance / Other income, which likely won’t materially persist into FY24.

And while its analysts were disappointed with the performance of Suncorp’s banking operations, they note that this side of the business is being divested. In addition, the remaining general insurance business appears well-placed for the year ahead. It adds:

The general insurance business however is positioned well with pricing very strong and increasing over 2H23 perhaps 15-20% in order to hold margins in the 10-12% range while investing in the business (flat expense ratios) and strong book growth guided (10% into FY24). SUN is also using the pricing environment to build resilience in margin / reserves with a view to then increasing margins to the top end of the 10-12% range and growing volumes.

All in all, this could make Suncorp shares worth considering if you’re looking for exposure to the insurance industry.