QBE

Insurance Australia (IAG) has a target price of $3.83 and an under-perform recommendation on the stock from Australian Stockmarket analyst Macquarie Research Equities.

Insurance Australia (IAG): In A Grind

IAG’s CEO, Michael Hawker, has announced his resignation on the back of a loss of key institutional support. His replacement is COO and former Promina CEO, Mr Mike Wilkins. Macquarie Research Equities (MRE) discusses the impacts of this move for the company and the implications of IAG’s global operational review in early July.

The Impact

Here is an update on Insurance Australia Group (IAG) from sharemarket analyst Macquarie Research Equities.

Insurance Australia Group (IAG) Revised proposal deemed 'inadequate'

Event: Cannot recommend QBE's latest proposal to shareholders:

IAG's Board today announced that it cannot recommend QBE's latest scheme proposal ($0.90 cash + 0.145 QBE shares) to its shareholders. The Board considers the revised proposal to be (1) priced opportunistically (2) not reflective of IAG's underlying value and potential deal synergies (3) not fully developed.

QBE Insurance Group (QBE) raised its proposed price for each IAG share to $0.90 cash and 0.145 QBE shares (previously $0.70 and 0.142) from Australian stockmarket analyst Macquarie Research Equities.

QBE Insurance Group (QBE) Increases proposed price

Event: Revised offer:

Here is an insurance sector update from Australian market analyst UBS.

Insurance Sector

108 profitability better, cost inflation up
Gross underwriting margins improving in personal lines:

QBE Insurance (QBE) has a maintained Outperform recommendation and a $28.84 share price target after the AGM from Australian sharemarket analyst Macquarie Research.

QBE: Margins Looking Up

QBE Insurance Group (QBE) has an Outperform recommendation and a 12 month price target of $12.84 for their shares from stockmarket analyst Macquarie Research. The insurance provider is also the analysts preferred company in the insurance sector.

Macquarie Research Equities (MRE) has reiterated their outperform recommendation for QBE with a 12-month share price target of $24.02. "QBE remains MRE’s preferred general insurance exposure reflecting superior top line growth prospects, exposure to more favourable insurance pricing conditions in international markets, and relative earnings certainty." The broker notes that QBE shares have been "stand-out performers in the ASX200 for the calendar year to date" and has "gained 12.6% versus the ASX200 return of 8.9%, outperforming the market by more than 3%." QBE Ltd.

QBE Insurance have a reiterated Outperform recommendation and a 12 month price target of $35.08 per share from market analyst Maquarie Research Equities. Yesterday, QBE held its 2007 AGM, where management confirmed recent guidance at the FY06 result is unchanged. The analyst has said that yesterday's comments may "slightly enhance consensus Earnings Per Shares (EPS) forecasts", and accordingly, reiterate their outperform recommendation. FY07 guidance provided with the release of the FY06 result is unchanged:
(1) 17.5–18.5% FY07 insurance margin.
(2) 30% increase in FY07 Gross Written Premium (GWP) and 40% increase in FY07 Net Earned Premium (NEP) (subject to no regulatory delays in settling recent US acquisitions)
(3) 20% increase in FY07 NPAT and 15% increase in diluted EPS (with
capital gains on equities at a lower level than the past two years)

QBE Insurance management have reiterated that 2007 guidance is premised on average rate reductions of 3%. This does not specifically refute recent speculation that pricing has fallen by more than the 3% allowance, but if this has in fact been the case, management does not view it as material enough to warrant any change to existing margin guidance. The equity component of the US acquisition funding package has been reduced to less than $1bn from $1.3bn previously. This implies no further equity issuance and so the next two dividends will no longer be underwritten, resulting in just under 40m shares being issued, relative to the 60m originally envisaged by QBE. QBE does not contemplate any further major US acquisitions for at least the next 18 months, although it is investigating a number of small acquisitions in other countries. Importantly, currency sensitivity was provided for the first time. A 1% change in the A$ relative to all currencies (sustained for 12 months) equates to a FY07 NPAT impact of ~$10m, or 0.5% based on the anlayst's FY07 NPAT forecasts. This disclosure should alleviate any exaggerated fears regarding excessive adverse leverage to recent A$ strength. QBE also stated that subject to exchange rates, closing gross Funds Under Management (FUM) is expected to be ~$28bn by the end of FY07 and around $30bn by FY08.