IAG share price races to 52-week high on strong investor day update

The Insurance Australia Group Ltd (ASX: IAG) share price is having a strong session.

So much so the insurance giant’s shares have climbed 3% to a 52-week high of $5.29.

Why is the IAG share price hitting new heights?

Investors have been bidding the IAG share price higher today after responding positively to the company’s investor day update.

That update included topics such as the current operating environment, its medium-term targets, and strategic initiatives.

In respect to the former, the company’s CEO, Nick Hawkins, revealed that results to date provide confidence that IAG will achieve its guidance of around 10% gross written premium (GWP) growth in FY 2023. In addition, the business is trending towards a 10% reported insurance margin for the full year.

This is being underpinned by both IAG’s Australian divisions, Direct Insurance Australia and Intermediated Insurance Australia, which have delivered a material improvement in reported and underlying margins in the second half of FY 2023. Hawkins said:

Our Australian businesses are expected to deliver improved second half results reflecting strong top-line growth, increased earned premiums, and improving claims trends.

Though, things aren’t so positive across the Tasman Sea. He adds:

Our New Zealand business, after experiencing the second and third largest natural disaster loss events on record, is experiencing the elevated inflation impact on non-peril motor and home claims costs.

We also anticipate a small net reserve release and favourable credit spread impacts in the second half. These two positives are likely to be offset by natural perils which will be moderately over the revised expectation, assuming an average June month.

Medium-term targets

The good news is that management is feeling even more upbeat about its outlook, which may be boosting the IAG share price today.

It has increased its medium-term return on equity (ROE) target by one percentage point to 13%-14%. The improved ROE is based on a medium-term insurance margin target of 15%.

Hawkins explained the upgrade. He said:

The strong top-line growth we’re achieving, and the improved investment returns we are seeing on shareholder funds, means an increased ROE target of 13% – 14% is realistic and achievable over the medium term.

IAG plans to release its full-year results on 21 August.