IAG shares rise as UBS upgrades to 'buy'
Make us a preferred source
Make us a preferred source on Google
The news: IAG shares gained in morning trade after UBS upgraded its rating on the insurance group to 'buy', citing the company's "multiple sources of margin and earnings support".
The numbers: Shares were up 2.9% to $8.49 at midday AEST, extending gains to around 20% over the last 12 months.
UBS upgraded the insurer from 'neutral' to 'buy' and lifted its 12-month price target from $9.30 to $9.50.
The context: UBS analysts said reinsurance profit commissions could boost IAG's insurance trading ratio margin by 60 basis points, and lift its earnings-per-share (EPS) outlook by around 5%.
They noted that IAG's earnings outlook is supported by gross written premium growth in the group's home and motor segment, and upside risk following the insurer's recent acquisition of the Royal Automobile Club of Western Australia's insurance business.
What they said: "Combined with potential upside from a range of other strategic initiatives, we see EPS and value risks skewed to the upside and upgrade to Buy," the analysts said.
The source: UBS research
