Can the performance of the company’s shares last earnings season provide any insights?
The post How did the IAG (ASX:IAG) share price respond last earnings season? appeared first on The Motley Fool Australia. –
The Insurance Australia Group Ltd (ASX: IAG) share price has been on somewhat of a rollercoaster ride over the past 12 months. This has been characterised by the insurance giant’s ongoing challenges to navigate its way through COVID-19.
At Monday’s market close, IAG shares finished the day up a healthy 4.61% to $5.22. Despite the fact the company’s shares have gained more than 6% in the past week, when comparing to this time last year, IAG shares are just 4% higher.
With the August 2021 reporting season now heating up, we take a closer look to see if investors can learn anything from the performance of the IAG share price last earnings season.
What happened in the first half of FY21?
In February 2021, IAG delivered its half-year results to the market, reporting growth across the board.
This surprised investors as gross written premiums (GWP) grew 3.8% to $6,188 million and the level of claims declined. The company’s bottom line delivered a 33.1% increase in insurance profit to $667 million. Clearly, the market had been anticipating that IAG would report a significant loss for the period. This is because the company had previously announced $1.15 billion in pre-tax charges for business interruption claims.
Consequently, the IAG share price rose by more than 6% to an intraday high of $5.38 on the day, and then to $5.49 the day after. However, this rise was short-lived, with IAG shares tumbling soon after for a number of weeks. In mid-March, the company’s share price hit a low of $4.30, reflecting a 22% decline from its intraday high on 10 February.
What should investors look out for?
With IAG due to report its full-year results tomorrow, investors may be wondering what to expect.
In late July, the company released a preliminary FY21 result which was underscored by some interesting numbers that missed the mark with Goldman Sachs.
According to the update, GWP is expected to grow at 3.8%, while net earned premium is forecast to increase 1.5% to $7,473 million.
The underlying insurance margin is also predicted to come in at 14.7% for FY21. This metric recorded a 16% fall in the first half but is projected to bounce back by 13.5%.
Cash earnings is anticipated to be $747 million, reflecting a 168% jump on the prior corresponding period (FY20).
In line with the earnings, analysts at Goldman Sachs believe the company will pay a full-year dividend of 22 cents per share. When factoring in the FY21 interim dividend payment of 7 cents, this equates to 15 cents for the second half.
IAG share price snapshot
In 2021, the IAG share price has moved 11% higher thanks to its recent run since early August.
Based on valuation grounds, IAG commands a market capitalisation of around $12.8 billion, with more than 2.4 billion shares outstanding.
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Motley Fool contributor Aaron Teboneras 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 owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.