Morgans assesses a disappointing FY21 net loss of -$427m after Insurance Australia Group outlined its preliminary results. More positively, FY22 guidance is considered to point to a reported insurance margin (RIM) improvement on the second half of FY21.
The broker highlights the RIM is also “better quality” given it provides for an additional circa $100m in natural hazard claims ($765m in total). It’s felt the group’s earnings trajectory should improve from here, off cyclically-low levels.
Morgans sees value in the group and retains its Add rating while lowering FY21 and FY22 EPS estimates by -8% and -2%. The broker’s price target falls to $5.37 from $5.46.
Sector: Insurance.
Target price is $5.37.Current Price is $4.91. Difference: $0.46 – (brackets indicate current price is over target). If IAG meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges – negative figures indicate an expected loss).
