Insurance Australia Group Update

Submitted by Craig Strzelecki on 23 April, 2007 - 19:17

Insurance Australia Group (IAG) have a Buy 2 broker call and a $7.05 share price target from sharemarket analyst UBS. Q1 2007 AA British motor rates stay high: According to the AA, comprehensive motor rates fell 0.4% in Q1, with non-comprehensive rates down 0.6%. The trend, however, remains solid, with rates up 5.8% & 3.8% respectively on pcp. Moreover, the reduction in the quarter looks to have been caused by introductory discounts offered by some participants, which appear unsustainable. The analyst estimates that IAG will derive c16% of group GWP from the UK in FY08. These businesses are almost exclusively exposed to motor risks, with a small home book. AA data hint at flat home rates. Their preferred exposures are QBE and IAG: preferred exposures in the Australian insurance sector are QBE (Buy 2: locked-in growth, acqn upside, strong RoE) and IAG (Buy 2: better personal lines trend, offshore opportunities, value play). We have Neutral 2 ratings on SUN (potential upside but integration risk), AMP (domestic mkt strength, uncompelling valn) & AXA (capital initiatives, Asia upside, but AUD impact & fair valuation). The analyst values Insurance Australia Group (IAG) using an EVA/DCF methodology applying 5.25% long-term premium growth, 10% long-term insurance margin and a 9.9% discount rate. Our valuation and price target are unchanged at $7.05 and we retain our Buy 2 rating.

Insurance Australia Group Limited is listed on the Australian Stock Exchange (ASX) under stock code IAG. You can view their investor website here. IAG was listed on the ASX on 8 August, 2000. Michael Hawker is the CEO of Insurance Australia Group and James Strong the Chairman. IAG is a provider of general insurance, including full range of personal and commercial insurance products. Also provider of financial services products. 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!