Great article on IAG today
IAG AGM This Week November 13 2006 - Australasian Investment Review – (AIR)
http://www.aireview.com.au/index.php?act=view&catid=8&id=4668&setSub=1
Article included:
Brokers Goldman Sachs JB Were see IAG's prospects on the up according to a note to clients on Friday.
The brokers upgraded IAG from "underperform" to "marketperform" on the expectation of improved newsflow in the near-to-medium term.
"The company has indicated that its personal lines market share has begun to recover and that it may be in a position to provide some evidence of this at its AGM."
"A Strategy Briefingnext week (Wed, 22 Nov) initiated by the company with the goal, we assume, of getting back on the frontfoot (after having taken a PR/newsflow battering for some time). We are not banking on (new) positive news, but it should give an 'unloved' company the chance to promote its strengths/opportunities.
"China deal due for completion ("by November"): While the market will continue to debate the pros and cons of the China Pacific deal, it seems unlikely that the initial announcement will be taken badly – because the price range has already been announced and management has stated that any deals it does will need to be accretive (on an EPS basis and relative to its WACC) by year 2."
"IAG likely to benefit from the SUN/PMN deal: If SUN’s proposed takeover of PMN proceeds, we believe this would be a clear at-the margin plus for IAG – because it would improve IAG's medium-term revenue growth opportunities and be good for industry structure," said GSJBW."
But GSJBW outlined some telling points against getting too enthused about IAG.
It pointed out that "We are still not enthused with the valuation equation; (2) We still believe there is downside risk to the group’s dividend payout ratio over the medium-to-longer term; (3) Commercial lines pricing is unlikely to reach a floor (let alone bounce) for some time; (4) While IAG’s personal lines momentum is picking up, its financial results are likely to continue lagging its peers for at least one more reporting season; and (5) If the SUN/PMN deal does not proceed, the market may "take something out" of the IAG price to reflect this."
IAG's 2006 profit wasn't one to write home about.
It earned $759 million after tax, down on the $781 million earned in 2005, its insurance margin was 14.4 per cent compared to 2005's 15.5 per cent and it resorted to that hoary old tactic of sticking up dividends to keep shareholders sweet when the earnings picture wasn't all that flash.
"The Group also declared its highest ever final dividend of 16 cents per share and, following renewed momentum in the second half, expects gross written premium (GWP) to increase 5-10% in the full year ended 30 June 2007," the company said in its profit announcement.
Shareholders will be looking for confirmation that the profit guidance will be met, at least in the first half, and some idea of how the company will lift performance in 2007.