Analysts tough on IAG
Market watchers have savaged IAG following its announcement of a downsized profit for fiscal 2007.
Analysts, including one that suggested investors flee the stock “women and children first”, have criticised IAG’s most recent financial results for relying too heavily on reserve releases – lifting shareholder returns too high – and for its poorly performing UK division.
In a report on the company last week, JP Morgan declared the result the most distorted it has seen as reserve releases overshot storm losses by more than $100 million. Other analysts said the high level of releases exacerbated an already poor result for IAG, which saw profit fall 27% to $552 million.
Credit Suisse also criticised the company’s poor insurance margin, squeezed to 11.4% – down 2.3 percentage points on fiscal 2006. Commercial insurance margins were just 10.6% in the second half.
But it wasn’t all bad news for the industry. Although analysts mostly downgraded their ratings on IAG, ABN Amro raised its recommendation on Suncorp from hold to buy, following the company’s record profit announcement last month.
ABN Amro, the only broker to upgrade its rating on Suncorp stock, says Suncorp has maintained strong reserves and is well insulated against future shocks from catastrophic events.
Analysts, including one that suggested investors flee the stock “women and children first”, have criticised IAG’s most recent financial results for relying too heavily on reserve releases – lifting shareholder returns too high – and for its poorly performing UK division.
In a report on the company last week, JP Morgan declared the result the most distorted it has seen as reserve releases overshot storm losses by more than $100 million. Other analysts said the high level of releases exacerbated an already poor result for IAG, which saw profit fall 27% to $552 million.
Credit Suisse also criticised the company’s poor insurance margin, squeezed to 11.4% – down 2.3 percentage points on fiscal 2006. Commercial insurance margins were just 10.6% in the second half.
But it wasn’t all bad news for the industry. Although analysts mostly downgraded their ratings on IAG, ABN Amro raised its recommendation on Suncorp from hold to buy, following the company’s record profit announcement last month.
ABN Amro, the only broker to upgrade its rating on Suncorp stock, says Suncorp has maintained strong reserves and is well insulated against future shocks from catastrophic events.