Preliminary financial results for Insurance Australia Group revealed a reported loss -$180m worse than UBS’s estimate. This was considered largely attributable to further ‘one-offs’ related to customer refunds, payroll compliance, and reserve strengthening.
The broker highlights the ‘one-offs’ were offset by stronger shareholder funds income. Management guided to underlying margin trends, tracking at the lower end of the 13.5-15.5% guidance range, with potential upside from current covid-19 mobility restrictions.
While long-tail reserve strengthening remains a concern, the analyst thinks this will likely be outweighed by the potential for a business interruption (BI) provision release. UBS retains its Buy rating and lowers its target price to $5.65 from $5.80.
Sector: Insurance.
Target price is $5.65.Current Price is $4.91. Difference: $0.74 – (brackets indicate current price is over target). If IAG meets the UBS target it will return approximately 13% (excluding dividends, fees and charges – negative figures indicate an expected loss).
