IAG Attempts to Reassure Greensill Exposure Is Not a Material Earnings Risk; FVE Unchanged

The market was concerned IAG could be on the hook for large claims associated with the potential failure of Greensill, marking the shares down 10% intraday on Tuesday. IAG halted trading to clear up the issue and the shares subsequently recovered part of the losses that afternoon. We believe shares in the no-moat-rated insurer screen as undervalued compared with our unchanged AUD 6.00 fair value estimate. While uncertainty around business interruption claims and now this will weigh on the shares, we remain positive in an earnings recovery on premiums' rate increases and well controlled operating costs.