While Insurance Australia Group's FY21 cash profit was solid, Morgan Stanley notes below the line refunds and staff cost provisions reduce FY21 excess capital by around -$400m, versus the broker's prior forecast.

The broker highlights reported profit of -$427m was well below an estimated -$183m, on below-the-line charges. Management has guided to "low single-digits" FY22 gross written premium (GWP) growth.

The analyst feels lock downs are depleting the group's safety buffer on Business Interruption (BI) provisions, doesn't believe the stock is cheap and sees few positive catalysts.

Morgan Stanley's Equal-weight rating is unchanged and the target price falls to $4.80 from $4.85. Industry view: In-line.

Sector: Insurance.

Target price is $4.80.Current Price is $4.90. Difference: ($0.10) - (brackets indicate current price is over target). If IAG meets the Morgan Stanley target it will return approximately -2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

© 2021 Acquisdata Pty Ltd., source FN Arena