IAG – Morgan Stanley rates the stock as Underweight

Morgan Stanley downgrades IAG to non-consensus Underweight and cuts the target price to $3.75 from $4.80, listing 10 contributing factors that should increase the company’s capital costs and hurt the company’s ESG prospects.

The broker cites IAG’s skew to CAT-prone short-tail lines, NZ reform risks, higher catastrophe-cost volatility; higher reinsurance pricing and tighter access; quota share reinsurance renewal risks; regulatory risk on personal reinsurance pricing; capital regulatory risk; consumer data right concerns; CDR regulation; reserving risk; and a remuneration report strike.

But wait, there’s more.

Morgan Stanley casts a nervous eye to margin headwinds and market share losses; and expects an extended $1.8bn capital buffer may be required to offset reduced capital flexibility – although the release of business interruption combined with the liberation of tax assets could be another option.

Sector: Insurance.

 

Target price is $3.75.Current Price is $4.30. Difference: ($0.55) – (brackets indicate current price is over target). If IAG meets the Morgan Stanley target it will return approximately -15% (excluding dividends, fees and charges – negative figures indicate an expected loss).

 

 

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