QBE Insurance Group

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:

QBE Insurance Group (QBE) has an increased share price target of $34.50 (from $30) and a retained Buy/Medium Risk trading recommendation from share analyst Citigroup Investment Research (CIR). The analyst sees QBE as a good relative play in a market where most financial services stocks are trading expensive. CIR's earnings changes largely play catch-up on the Winterthur deal earlier this month, though they have also applied a further nudge to their FY08E forecasts. Their EPS changes are: FY07E: +4%; FY08E: +12%. CIR are forecasting a 22.2% margin for FY06E, but they believe even this could be exceeded depending to what degree QBE decides to strengthen its reserving assumptions. Early evidence on the 1 Jan renewals suggests a perhaps surprisingly orderly market in reinsurance with rates flat to slightly down in most classes, while in primary lines weakness is still being seen in many commercial classes. US retrocession rates, however, posted further sharp increases. With two relatively large recent US acquisitions to integrate, QBE suggests that more major US acquisitions are off the agenda for now. However, this does not prohibit further sizeable acquisitions in other jurisdictions and, in CIR's view, it still has plenty of balance sheet flexibility to enable it to take further advantage of the P/E arbitrage opportunity.

QBE Insurance Group (QBE) shares have retained their Ourperform recommendation with a $29.59 revised share price target for stock analyst Macquarie Research Equities (MRE). The analyst sees QBE having an attractive growth profile. MRE have noticed that QBE shares have performed strongly in this half with their shares up 28 percent since June. QBE, a provider of reinsurance and general insurance announced last night the acquisition of Praetorian Financial Group, a US specialist property and casualty primary insurer, from Hannover Re for US$0.8billion. In conjunction with the acquisition announcement, QBE indicated that it expects its FY06 insurance profit margin to be "around 20 percent of net earned premium" (compared to previous guidance of 17–18%). It also expects profit after tax to be up "around 30%". After this news, the analyst revised their share price target up to $29.59. On the other hand, another stock analyst Citigroup Investment Research (CIR) have a share price target of $30 for this particular Australian stock. They have lifted their share price target from $26 to $30 and retain their Buy/Medium Risk share recommendation. Their moves also follow QBE's post market close announcement that it is acquiring Praetorian Financial Group from Hannover Re for US$800m. A previous QBE Insurance stock recommendation.