In the lead-up to Insurance Australia Group’s investor day on December 7, Macquarie looks at the group’s ability to continue outperforming industry profitability. The ability to achieve insurance profit greater than $250m in the Intermediated Division is part of investors’ focus.
While achieving greater than 10% margins (implied by the $250m) in the Intermediated Division may be difficult, the analyst believes the market is already pricing in a significant discount for earnings risks.
The broker acknowledges short-term risk yet believes the stock is cheap. The Outperform rating and $5.40 target are unchanged.
Sector: Insurance.
Target price is $5.40.Current Price is $4.55. Difference: $0.85 – (brackets indicate current price is over target). If IAG meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges – negative figures indicate an expected loss).
