IAG shares soar, brokers to upgrade

February 23, 2012

Shares in Insurance Australia Group (IAG) jumped eight per cent after the insurer flagged it was on track to reap higher revenue from premiums in 2012.

IGA's upbeat forecast came as it posted a 10.6 per cent fall in profit to $144 million for the six months to December 31.

However, IAG upgraded its guidance for gross written premium for the full financial year, saying it expects growth of between eight and 10 per cent.

Gross written premium grew by 9.7 per cent to more than $4.3 billion in the first half.

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The insurer also pleased investors with better-than-expected first half insurance margins.

The company's insurance margin of 7.1 per cent beat market expectations of around 6.5 per cent, and was enough to make analysts consider upgrading the stock.

Investors celebrated, sending IAG's shares 23 cents, or 7.9 per cent, higher to $3.135 by 1310 AEDT.

CMC Markets chief markets strategist Michael McCarthy said IAG beat insurance claims estimates across all of its businesses except its Asia operations.

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"This is the key driver of the share price increase along with the positive outlook," he said.

Morningstar insurance analyst David Walker said he planned to upgrade his full year 2011/12 forecasts for IAG given its hopes of delivering an insurance margin in the 10-12 per cent range.

"This makes our nine per cent forecast look too light and we expect to upgrade," he said.

IAG's underlying first half insurance margin of 10.7 per cent was 1.3 per cent above the previous corresponding period and better than expected.