Morgan Stanley cut FY26 earnings forecasts for insurers on lower investment yields, but continues to favour the group on double-digit underlying EPS growth, improving quality and capital management options.

For Insurance Australia Group, the broker cut FY25 cash net profit forecast by -1% on mark-to-market, offset by an estimated 10% budget beat in 2H25 on catastrophe claims.

FY26-27 forecasts cut by -3% on lower investment yields.

Equal-weight. Target cut to $7.85 from $8.05.

Sector: Insurance.

Target price is $7.85.Current Price is $8.28. Difference: ($0.43) - (brackets indicate current price is over target). If IAG meets the Morgan Stanley target it will return approximately -5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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