A change in covering analyst has led to a downgrade to Sell from Neutral on Insurance Australia Group from UBS as the company faces a number of challenges.
NRMA is being sued by the regulator for overcharging. The commercial business is undergoing remediation work. Most of IAG’s growth options have been divested in recent years. Positive covid impacts have now reversed due to supply chain issues driving a spike in claims.
Management is confident in achieving its 250m insurance profit target by FY24. In FY22 to date, price increases of 9% are apparently holding without major volume loss, the broker notes, but It is not clear this level of repricing is sufficient to restore double-digit margins.
Target falls to $4.20 from $5.35.
Sector: Insurance.
Target price is $4.20.Current Price is $4.36. Difference: ($0.16) – (brackets indicate current price is over target). If IAG meets the UBS target it will return approximately -4% (excluding dividends, fees and charges – negative figures indicate an expected loss).
