Insurance Australia Group (IAG) – Growing in confidence
December 17, 2024
Insurance Australia Group sells general insurance products and provides investment management services in Australia and New Zealand. It offers policies for vehicles, homes, businesses, travel, boats, caravans, landlords, farms, trade, strata and investment properties, rural and personal, construction and engineering, compulsory third party, directors and officers, professional indemnity, workers’ compensation, marine, liability, home-owners warranty, casualty insurance products, as well as reinsurance. Insurance Australia Group was founded in 1920 and is based in Sydney.
Insurance Australia Group recently hosted an investor day that left Ord Minnett more confident in the company’s earnings outlook and its options to grow the business, which was most recently boosted by the $855 million acquisition of the insurance business of Queensland motoring group RACQ.
The company is eyeing growth in car and home insurance to fuel this expansion of market share, while Ord Minnett expects the revamp of its reinsurance arrangements will remove a lot of volatility from its earnings performance. IAG is also aiming for improved margins and efficiency via technology investment, which should ameliorate lower investment yields as interest rates fall and any pressure from attritional loss rates.
Post the investor day, we have made no changes to our EPS forecast for FY25, although our FY26 and FY27 estimates rise 2% and 5%,respectively. Our target price on IAG increases to $9.30 from $8.90, and we maintain our Accumulate recommendation.
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