Home / Sector / Financial Shares / Why a ‘turning point’ could spark a rise for the IAG share price

Why a ‘turning point’ could spark a rise for the IAG share price

Here’s why the clouds are lifting for this insurance giant.

Latest posts by Tristan Harrison (see all)
Published
| More on:
A female sharemarket analyst with red hair and wearing glasses looks at her computer screen watching share price movements.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The IAG share price has jumped 30% in the last year
  • Fund manager WAM thinks that IAG can keep rising after a difficult period
  • Insurance premium rises and a transition to El Nino could help earnings go higher

The Insurance Australia Group Ltd (ASX: IAG) share price could be one ASX share to perform well according to the fund manager Wilson Asset Management.

Readers may already know that IAG is one of the biggest insurers in Australia and New Zealand. It has a number of brands including NRMA Insurance, CGU, SGIO, SGIC, Swann Insurance, WFI and ROLLiN’ in Australia. The New Zealand brands include NZI, State and AMI.

A few months ago, the company announced its FY23 half-year result which showed that gross written premium (GWP) rose by 7.5% to $7 billion, the insurance profit increased by 24.1% to $350 million, cash earnings rose 26.7% to $223 million and net profit after tax (NPAT) grew by 170.5% to $468 million.

It has been a good 12 months for the company, with the IAG share price going up by over 30%, as we can see on the chart below.

The fund manager WAM believes there could be more gains to come.

A turning point?

The investment team at the listed investment company (LIC) WAM Leaders Ltd (ASX: WLE) noted that in June, IAG held an investor day for shareholders where the business told the market about its medium-term aspirations and re-iterated its shorter-term expectations.

The WAM Leaders team thought this represented a “turning point” for a “beleaguered stock” that has suffered from management transitions, business interruption test case judgements and elevated natural catastrophes over the last few years.

The fund manager said:

We remain optimistic on Insurance Australia Group as premium rate increases exceed claims inflation and we are likely entering an El Nino weather event, which is typically associated with less frequent natural catastrophes.

El Nino describes a period of drier (and hotter) weather, while La Nina describes a period of wetter weather.

IAG share price valuation snapshot

It has been a period of strong performance for the ASX share – in just the last six months, it has risen by 14%.

Looking ahead to the 2024 financial year, IAG shares are valued at 16x FY24’s estimated earnings, according to the projections on Commsec, which would be a 70% or so jump in earnings compared to the forecast earnings for FY23 (which is finished but not yet reported).

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Financial Shares

Two astronauts stand on the moon, indicating a rocketing share price
Financial Shares

2 ASX finance shares (not the big banks) Celeste is riding to the moon

| Tony Yoo

These stocks could be a handy way to cash in while consumers and businesses are struggling with high interest rates.

Read more »

Young woman using computer laptop with hand on chin thinking about question, pensive expression.
Financial Shares

Are Suncorp shares a buy after its FY23 results?

| James Mickleboro

Should you be buying Suncorp shares? Let's find out.

Read more »

A mature aged man with grey hair and glasses holds a fan of Australian hundred dollar bills up against his mouth and looks skywards with his eyes as though he is thinking what he might do with the cash.
Dividend Investing

Everything you need to know about the AMP dividend

| Tristan Harrison

Shareholders will soon be getting bigger payments.

Read more »

A man in his 30s with a clipped beard sits at his laptop on a desk with one finger to the side of his face and his chin resting on his thumb as he looks concerned while staring at his computer screen.
Earnings Results

QBE share price sinks as catastrophe claims take a bite out of revenues

| Bernd Struben

ASX 200 investors are bidding down the QBE share price following the release of the insurance company’s half-year financial results.

Read more »

Earnings Results

AMP share price sinks 6% as half-year profits slump

| Mitchell Lawler

Pockets of AMP's business are delivering underlying growth, but will it be enough to impress shareholders?

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Financial Shares

3 reasons to buy Macquarie shares at $175

| Tristan Harrison

It could still be a great buy at the current valuation.

Read more »

A man sits uncomfortably at his laptop computer in an outdoor location at a table with trees in the background as he clutches the back of his neck with a wincing look on his face.
Earnings Results

Suncorp share price slides despite 69% full-year profit boost

| Bernd Struben

Suncorp’s group profits soared 69% year on year to $1.15 billion.

Read more »

Broker looking at the share price.
Financial Shares

Own IAG shares? Here’s what to expect from the insurance giant’s FY23 results

| James Mickleboro

Is IAG going to deliver something special this month?

Read more »