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INSURANCE AUSTRALIA GROUP LIMITED (IAG)

INSURANCE AUSTRALIA GROUP LIMITED (IAG)

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General Information
Company Name: Insurance Australia Group Limited
Stock Code: IAG
Website: www.iag.com.au
GICS Sub-Industry: Property & Casualty Insurance
Market Cap ($M): 6,050
Equiv. Shares (M): 2,079

Current Price Data+
Current Price Open High Low Last Close Volume Price Movement
 $ 2.910 $ 2.890 $ 2.920 $ 2.890 $ 2.920 5,857,902 $ -0.010  -0.342 %

Current Broker Consensus Recommendation more
Recommendation: Hold
Recommendation Date: 19th Jan 2012
12 Month Target Price (average): $3.388
Brokers Surveyed: 8

Company Overview

Business Description:
Insurance Australia Group Ltd (IAG) is the largest general insurer in Australia and New Zealand, providing personal and commercial insurance policies under the brands NRMA Insurance, CGU, SGIO, SGIC and Swann Insurance. IAG also underwrites motor, home and some other lines of insurance for RACV in Victoria and has operations in Thailand, the UK, Malaysia and China.

Strategy Analysis:
IAG's targets are top-quartile shareholder returns and a cash ROE of 1.5 times WACC. The strategy is to accelerate growth in Australia and New Zealand, lift Asian premiums to 10% of total gross written premiums by 2016 and return the UK business to profit. Specific steps are to build on momentum in the Australia Direct business through a focus on customers´ needs and consistent product offerings, ride an eventual upturn in commercial lines, and in New Zealand to increase market share by developing a reputation for customer service after major claims events. The Asian expansion plans include existing markets of Malaysia, Thailand and India, and in new target markets of China, Vietnam and Indonesia. Insurance Australia Group reported NPAT of $250m for the year ended 30 June 2011. Revenues from ordinary activities were $12.25bn, up 30.5% from last year. Diluted EPS was 12.01 cents compared to 4.36 cents last year. Net operating cash flow was $620m compared to $1.12bn last year. The final dividend declared was 7 cents, taking the full year dividend to 16 cents compared with 13 cents last year. Insurance and investment operations are, by their nature, volatile due to the exposure to natural perils and industry cycles and thus profit predictions are difficult. Nonetheless, the group's guidance for the year ending 30 June 2012 is: GWP growth of 6-9%; and an insurance margin in the range of 10-12%.


Financial Summary
Year to Jun NPAT EPS EPS chg (%) PER DPS Yield (%) Franking (%)
2013  F 768.1 37.0 85.0 7.9 22.0 7.6 100.0
2012  F 415.3 20.0 -9.8 14.6 15.0 5.2 100.0
2011  A 460.0 22.1 45.9 16.4 16.0 4.4 100.0
Source: Morningstar analyst estimates.

Peer Comparison
EPS Growth (%) P/E (%) Dividend Yield (%)
Company Mkt Cap 2011 A 2012 F 2013 F 2011 A 2012 F 2013 F 2011 A 2012 F 2013 F
Insurance Aust. Grp. (IAG) $6,071 M 1.4156 0.2309 0.7229 17.8812 14.5274 8.4320 0.0548 0.0514 0.0751
QBE (QBE) $12,751 M -0.3896 -0.4592 1.0630 9.7128 17.9604 8.7059 0.1120 0.0787 0.0912
Suncorp Group (SUN) $10,872 M -0.3148 0.6013 0.2161 19.1523 11.9604 9.8347 0.0414 0.0520 0.0659

Market Comparison
Earnings P/E Ratio P/B Ratio P/E Growth
IAG 0.53 15.7 1.32 0.34
Market 0.80 12.5 1.38 1.16
Sector 0.77 12.3 1.04 0.35

Directors
Name Position Start Date
Mr Michael J Wilkins Chief Executive Officer,Managing Director 26 November 2007
Mr Brian Martin Schwartz Non-Executive Chairman 01 January 2005
Mr Hugh Alasdair Fletcher Non-Executive Director 01 September 2007
Mr Peter Hallam Bush Non-Executive Director 07 December 2010
Ms Annamaria Hynes Non-Executive Director 01 September 2007
Yasmin Allen Non-Executive Director 10 November 2004
Mr Philip J Twyman Non-Executive Director 09 July 2008
Mr Phillip Colebatch Non-Executive Director 01 January 2007

Management
Name Position
A Cornish Chief Executive Officer
IR Foy Chief Executive Officer
JP Breheny Chief Executive Officer
JS Johnson Chief Executive Officer
P Harmer Chief Executive Officer
NB Hawkins Chief Financial Officer
LC Murphy Chief Strategy Officer
Chris Bertuch Company Secretary

Substantial Shareholders
Holding Name
106,030,735 (5.10%) National Australia Bank Limited

Calendar of Events
Date Event
23 August 2012 Report (Annual)
23 August 2012 Report (Prelim)
23 February 2012 Report (Interim)
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