The IAG (ASX:IAG) share price is down 10% so far in September. What’s next?

Shares in the Aussie insurer have underperformed in September.
The post The IAG (ASX:IAG) share price is down 10% so far in September. What’s next? appeared first on The Motley Fool Australia. –

The Insurance Australia Group Ltd (ASX: IAG) share price has been under pressure this month. Shares in the Aussie insurer are down 10.8% in the past month to their current $4.80 valuation.

So, what’s driving the company’s share price right now and what lies ahead for shareholders in 2021?

Why the IAG share price is down 10% in September

One recent ASX announcement appears to have triggered the recent share price slide for the Aussie insurer.

On September 6, IAG reported CMC Hospitality had filed an application to start a representative proceeding against the company in the Federal Court of Australia.

While IAG was unsure of the exact details of the proceeding, it noted the application “appears to relate to insureds who hold policies with CGU and business interruption losses related to COVID-19“.

CGU refers to CGU Insurance Limited, an intermediary-based insurance company under the IAG umbrella.

News of the court proceedings hit the IAG share price hard. That downward momentum has continued throughout September and seen the insurer’s shares slump 10% lower.

At the heart of the proceedings is COVID-19-related business losses. As lockdowns continue to roll on across Australia, businesses have been looking to their insurance policies for downside protection.

IAG said it is one of several insurers that will be part of “an industry test case” in the Federal Court. That test case will help determine what insurers must cover in relation to business interruption claims.

For its part, IAG said it will follow the court’s final ruling and resolve claims as quickly as possible once this has been determined.

The IAG share price has continued to slide throughout September. The broad market sell-off in the S&P/ASX 200 Index (ASX: XJO) last week also didn’t help boost the insurer’s value any higher.

What’s next for IAG?

The Federal Court rulings loom as a key factor for the IAG share price in the short term. The court will ultimately play a part in what IAG’s downside exposure is for business interruption claims which, in the era of COVID-19, would likely be significant.

The post The IAG (ASX:IAG) share price is down 10% so far in September. What’s next? appeared first on The Motley Fool Australia.

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Motley Fool contributor Ken Hall 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.

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