Insurance Australia Group's 1H profit missed the consensus forecast by-7% on a higher combined operating ratio (COR) and a retentions drop, explains Morgan Stanley. 

The reported insurance margin of 13.7% compared to the 14% forecast by consensus due to lower investment income, explain the analysts. This margin recovered from 12.5% in FY23 and entered the FY24 guidance range of 13.5-15.5%.

Management left FY24 margin guidance unchanged, despite a reduction in the CAT budget, implying to the broker weaker trends elsewhere.

The target falls to $5.45 from $5.50. The broker's Equal-weight rating is maintained on a full valuation. Industry view: In-line.

Sector: Insurance.

Target price is $5.45.Current Price is $6.13. Difference: ($0.68) - (brackets indicate current price is over target). If IAG meets the Morgan Stanley target it will return approximately -12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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