Thursday, Credit Suisse downgraded Industrial-Alliance Insurance Co. (IAG.TO) shares to Neutral from Outperform, while increasing its price target to C$31 from C$28. The brokerage raised its 2009 EPS estimate to C$2.65 from C$2.60, and its 2010 estimate to C$3.00 from C$2.80.
Analyst Bantis raised estimates largely on this quarter's earnings beat to his forecast and improving experience gains. The analyst increased price target to C$31 to reflect his forward estimates. However, given Industrial Alliance's sizeable share price outperformance relative to its larger peers and present full valuation (1.36x P/BV and 10x P/E), the analyst downgrade the stock to Neutral.
The analyst noted that Industrial Alliance reported a strong third quarter with EPS of C$0.74 per share (vs. his estimate of C$0.68). Earnings upside in the quarter was driven by the stock market rebound, no credit impairments, no reserve strengthening, and good experience gains. Individual Insurance sales rebounded as well. That said, management conceded that this quarter's earnings outperformance will be difficult to repeat.
The analyst said that based on current economic conditions, management does not expect year-end reserve changes on a net basis to materially impact fourth quarter of 2009 earnings. This is in stark contrast to larger peers who have already pre-announced material charges for third quarter of 2009 due to the updating of their equity, interest rate, and lapse assumptions.
Currently, IAG.TO is down C$0.24 or 0.79% and trading at C$30.21.
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