Why has the IAG price come under fire recently?
The post It’s been a tough month for the IAG (ASX:IAG) share price so far appeared first on The Motley Fool Australia. –
July has not been very kind to the Insurance Australia Group Ltd (ASX: IAG) share price.
The pain hasn’t stopped today either. At the time of writing, shares in IAG have tumbled more than 2.3% in today’s trading session.
Despite a weak start to the month, the IAG share price is still around 4% higher since the start of the year.
Let’s take a look at why the IAG price has come under pressure recently.
Why has the IAG share price stumbled in July?
Since the start of July, the IAG share price has tumbled more than 4.5% to date.
The most recent catalyst that could explain the weakness in the Iag share price can be traced back to earlier this week.
On Monday IAG announced its aggregate reinsurance cover for FY22.
IAG noted that the structure of its main catastrophe reinsurance program remains unchanged.
The FY22 aggregate cover provides protection of $350 million in excess of $400 million. In addition, individual qualifying events will be capped at $200 million in excess of $50 million per event.
Snapshot of the IAG share price
IAG is the parent company of a general insurance group with operations in Australia and New Zealand. The Group’s businesses underwrite over $12 billion of premium per annum, selling insurance under many leading brands, including NRMA Insurance, CGU and SGIO.
As noted previously, the IAG share price remains slightly positive for 2021.
Shares in the insurance giant came under pressure in mid-June, following flooding events in Victoria. IAG noted that the company received more than 4,300 claims relating to floods in the Gippsland region.
For FY21, IAG’s net costs for natural disasters are approximately $660 million, having budgeted for only $658 million in natural disaster claims at the beginning of the financial year.
The floods in Victoria were the third major claim this year following the previous floods in Sydney, and Cyclone Seroja in Western Australia.
Earlier this year, IAG reported a 33.1% increase in insurance profit of $667 million. The company cited a $100 million benefit from lower motor claim frequency, largely due to COVID-19 induced lockdowns in Victoria.
Overall the company recorded a loss of $460 million, largely due to claims by businesses under IAG’s business interruption insurance policies.
IAG was also on the receiving end of a lost landmark court case in NSW last year, which sought to exclude pandemic lockdowns from business interruption policies.
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Motley Fool contributor Nikhil Gangaram 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.