Insurance Aust Group (IAG) Updates

Insurance Aust Group (IAG) update from Australian stock analyst Macquarie Research Equities.

Insurance Aust Group (IAG) New CEO called up from the bench

Event: CEO change:

IAG today announced that Mike Hawker had resigned as CEO, effective immediately, citing a lack of support from several shareholders. Mike Wilkins is the new CEO, having been COO and board member since November 2007, when he joined the company.

Impact: More change likely:

The company also announced that it would report on its in-depth business review in early July 2008, covering every aspect of every division, both domestically and overseas. Recall that IAG's review of its UK operations is also nearing completion, and the company outlined cost saves and operational initiatives when it downgraded guidance in late April.

Action: A step in the right direction:

We believe that the changes announced today are a step in the right direction, as they signal an appetite for organisational change. We note, however, that operational improvement is likely to take some time and that it is not without risk - latest guidance for an unchanged FY08E dividend (UBSe 2.5cps cut to 27cps) may also be changed in order to shore up the company's capital position. Moreover, a capital raising similar to that recently completed by SUN cannot be ruled out, in our view.

Valuation: Restricted

We are currently restricted on IAG and cannot provide a price target or rating.