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1999
Iag Rebounds Despite Cut In Broker's Forecast
The Age
Tuesday January 14, 2003
Sydney
Shares in Insurance Australia Group yesterday continued their rebound to levels not seen since October's $1.86 billion CGU/NZI purchase and discounted capital raising, despite lingering concern about the group's cost targets and capital adequacy position.
IAG closed up four cents at $2.82, well above the $2.55 paid by institutions in the capital raising and perhaps helped by broker Merrill Lynch raising its valuation from $2.90 to $3.
The price is also well above the $2.40 price for retail investors under the share purchase plan for the CGU deal. Only a fraction of IAG's 1.1 million shareholders took up the offer.
But Merrill's increased valuation accompanied a 12 per cent reduction in the broker's forecast for 2002-03 net profit to $128 million, a result of adjusting IAG's share and bond portfolio to reflect market values.
Still, the broker expects IAG to benefit from the continued rationalisation of the general insurance industry and the possibility that more Australian general insurance subsidiaries of European insurers will be gulped up by top five players.
© 2003 The Age