Morgan Stanley raises its target for Insurance Australia Group to $6.60 from $5.45 as stronger, multi-year CAT cover, alongside a new reserving cover, reduces the group's cost of capital.

Management has entered five-year aggregate cover, or long-term perils (LTP) protection on CAT overruns, of up to $680m per annum. This protection lowers the cost of capital given improved earnings certainty over the next five years, explain the analysts.

The Equal-weight rating is retained. Industry view: In-line.

Sector: Insurance.

Target price is $6.60.Current Price is $7.14. Difference: ($0.54) - (brackets indicate current price is over target). If IAG meets the Morgan Stanley target it will return approximately -8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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