Insurance Australia Group (IAG) Share Trading Recommendation

Submitted by Craig Strzelecki on 23 February, 2007 - 14:34

Insurance Australia Group (IAG) have a Buy 2 share trading recommendation and a price target of $7.05 from analyst UBS. IAG has reported NPAT of $345m on an insurance margin of 13.3% (UBSe 13.4%). While 2.3% ahead of our expectations, the 25% drop in NPAT may have disappointed some. Operational performance was ahead of the analysts' expectations ($244m underwriting result beat us by 15%), assisted by expense management. Flat GWP in the Australian business showed top line momentum improvement, in our view. More positive expectations for international businesses (ex-NZ), and a lift in fee income forecasts have supported modest net EPS upgrades to FY07E, FY08E and FY09E. The analyst believes that there us upside risk in FY08/09 estimates. They believe their 3 year forecasts incorporate an increasing level of conservatism given the 1H07 domestic business result, today's commentary on better than anticipated results from UK businesses and potential opportunity offered by the likely SUN/PMN merger next month. They valued IAGby using an EVA/DCF methodology using 5.25% long-term premium growth, 10% long-term insurance margin and a 9.9% discount rate.

Insurance Australia Group Limited is listed on the Australian Stock Exchange (ASX) under stock code IAG. You can view their investor website here. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade IAG. Check your charts and good luck with your share trading!