UBS cuts profit forecast on IAG

SYDNEY - UBS has lowered its fiscal 2006 profit forecast by 3 per cent on Insurance Australia Group Ltd, after the company said it expected up to A$135 million ($159.74 million) in damage claims from a cyclone last month.

UBS, which maintained its share price target of A$5.60 and its "neutral" rating, said it forecast IAG to post a 2006 net profit of A$795 million for the 12 months to June 30.

UBS said rival insurers Promina Group Ltd and Suncorp-Metway Ltd offered superior top line growth potential at more attractive price-earnings multiples.

"We believe that the valuation impact of IAG's Asian expansion strategy continues to be undermined by execution risk and deteriorating domestic general insurance environment," UBS analysts Ralph Butterworth and Paul O'Sullivan said.

Shares in IAG last traded at A$5.59.

- REUTERS