UBS downgrades IAGUBS rates IAG as Downgrade to Sell from...

UBS downgrades IAG

UBSrates IAG asDowngrade to Sell from Neutral(5) -

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.

Target price is$4.20Current Price is$4.40Difference:minus $0.2(current price is over target).
IfIAGmeets the UBS target it will return approximatelyminus 5%(excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is$5.00, suggesting upside of14.7%(ex-dividends)

The company's fiscal year ends in June.

Forecast for FY22:

UBS forecasts a full yearFY22EPS of18.00cents. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is24.44. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is20.2, implying annual growth ofN/A. Current consensus DPS estimate is15.0, implying a prospective dividend yield of3.4%. Current consensus EPS estimate suggests the PER is21.6.

Forecast for FY23:

UBS forecasts a full yearFY23EPS of27.00cents. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is16.30. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is28.8, implying annual growth of42.6%. Current consensus DPS estimate is21.8, implying a prospective dividend yield of5.0%. Current consensus EPS estimate suggests the PER is15.1.