Recommendations
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Investment ratings
IAG is Australia's largest domestic general insurer. Although it owns heritage brands and has high market shares its products are commoditised and sustainable competitive advantages are elusive, hence the pressure on revenues and margins from competition. IAG has returned to focusing on underwriting discipline in the Australian and New Zealand businesses after a failed pursuit of scale for its own sake. General insurance is a high-risk business and investors should limit their portfolio weightings accordingly. The market is mature, premium rates are cyclical, large insured events occur without warning and claims trends are largely beyond the control of management in the short term. IAG's reinsurance protection and capital management mitigate the risk to some extent. Depending on price we recommend an investment in QBE, on quality grounds, rather than IAG.
Recent Analysis
According to the ABS the price of an unchanged basket of personal insurance policies rose by 10.3% on pcp in the March quarter. This was the fastest growth since June 2001 and above the five-year average of 4.5% pa. There are anecdotal reports the June quarter saw similar growth.
| Previous close | 52 week high | 52 week low |
| $3.52 | $4.32 | $2.94 |
| Sector | ||
| Insurance | ||
| Market cap | ||
| $7,291 Million | ||
| Total shareholder return (avg annual rate) | |||
| 1yr | 3yr | 5yr | 10yr |
| -6.9% | -7.6% | -1.5% | -- |
| Earnings and dividends forecast (cents per share) | |||
| 2009 | 2010 | 2011 | |
| EPS (c) | 7.7 | 14.5 | 27.3 |
| PE Ratio (x) | 45.7 | 24.3 | 12.9 |
| DPS (c) | 22.5 | 10.0 | 17.3 |
| Div Yield (%) | 6.4 | 2.8 | 4.9 |
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