Shares in insurance giant Insurance Australia Group Ltd (ASX: IAG) are trading down today and are now less than 2% in the red at $4.38.
IAG is coming off a difficult year in 2021 that saw its shares trade sideways before sliding down hard in the second half. Shares fell off the top of $5.45 in September to close the year 20% down from that point.
Last year was also another one marked with controversy and reprehensible conduct the firm became embroiled in by its own doing and admission.
For instance, the Australian Securities and Investment Commission (ASIC) has again launched proceedings against the company for erroneous actions to customers whereas IAG itself uncovered a string of compliance issues last year.
With all this in mind, could 2022 be the year of recovery for the IAG share price? Or is this beaten down stock likely to stay stuck in the mud for a while longer? Here's what the experts think.
Is 2022 the year for IAG's share price?
The team at Morgan Stanley doesn't particularly think so. The firm reckons there is a downside risk to the company's earnings due to recent perils activity, which infected IAG's share price poorly in 2021.
It also notes that IAG is exposed to catastrophe risk given that it has shifted its business into more short-tail lines.
As such, Morgan Stanley expects further downgrades to IAG's outlook particularly as there is little shield to the company in the event they materialise.
Analysts at UBS agree in entirety. The Swiss investment bank also thinks the perils activity is a material risk moving forwards. Both brokers are also wary of the regulatory scandals IAG is caught up in once again, which could pose a risk to the company's earnings outlook.
Both brokers feel this is a risk that shouldn't be discounted by investors at the present standing, particularly as there is less capital flexibility and increased earnings uncertainty.
However, the bearish sentiment isn't shared equally amongst the list of brokers provided by Bloomberg Intelligence.
It's all good– bullish forecasts do exist
For instance, Morgans recently retained its add rating even when trimming its own valuation of IAG to $5.31 per share. It also forecasts a dividend schedule of 18.2 cents per share for shareholders in FY22.
The firm is constructive on IAG seeing as the company has made inroads on its 5 year plan in FY22, and also likes the company's valuation with the recent pullback in share price.
It doesn't think the perils cost are much of an issue, and instead shrugs the topic off as "another 6 month period affected by weather for IAG, which is becoming a consistent theme for the general insurers".
Both Macquarie and Jarden each agree, with the pair rating IAG a buy whilst assigning price targets of $5.40 and $5.65 per share in 2022 respectively.
Credit Suisse also expect IAG to outperform in 2022 and values the company at $5.60 per share, noting it should absorb the aforementioned peril costs well this year.
Not only that, but the broker also likes IAG's valuation with the pullback in 2021, but is cautious on how the company intends to manage its insurance margins from a cost basis.
Factoring in the list of analysts provided by Bloomberg Intelligence, 61.5% have a buy rating on its shares, whereas the remaining 38.5% have a hold.
Consensus has the price target at $5.31, whereas the spread between the highest and lowest valuation is 18%.
With this in mind, it appears that expert sentiment is constructive on the IAG share price in 2022, and the majority of coverage seems to think this could be a year of growth from the current point.
