Shares in insurance giant Insurance Australia Group Ltd (ASX: IAG) are rangebound this afternoon and are now flat on the day at $4.72 apiece.
Following the release of IAG's half year results last week, investors have scaled back their enthusiasm for the stock. Previously, investors were successful in bidding the price up from a bottom of $4.24 on 1 February.
Morgans downgrades IAG from add to hold
IAG came in with a fairly weak set of results for the half, with revenue sliding more than 4% and insurance profit tanking almost 58% to $282 million.
As a result, analysts at Morgans reckon IAG's juice isn't worth the squeeze right now, noting the insurance giant's earnings guidance leaves plenty to be desired.
The broker downgraded its estimates on next year's net profit after tax (NPAT) for IAG by 2%–4% on weaker insurance forecasts, and on industry-specific headwinds.
As Morgans wound back its earnings forecasts, it also downgraded IAG from add to hold in the note today, slashing its IAG valuation by 4% to $5.12 in the process.
Morgans sees better value elsewhere in the ASX insurance sector and votes a pass on IAG in the meantime.
Meanwhile, analysts at Morgan Stanley also reckon IAG still faces numerous risks to its earnings outlook over the coming years.
Whilst margins improved and the insurer raised gross written premium guidance, Morgan Stanley analysts reckon that "the reported margin was not as strong with catastrophe costs and reserve headwinds".
Fellow broker Citi reckons that IAG's results were "a little disappointing", although at the same time, reckons that one-off expenses should cease in the second half.
Citi rates IAG a buy after its earnings and raised its price target by around 3% to $4.73 per share.
IAG share price snapshot
In the last 12 months, the IAG share price has slipped more than 11% into the red after a difficult year.
This year to date however, shares have climbed 11% and are up over 6% in the past 5 days of trading.
