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What’s weighing down the IAG (ASX:IAG) share price lately?

The clouds have been hanging over IAG lately…
The post What’s weighing down the IAG (ASX:IAG) share price lately? appeared first on The Motley Fool Australia. –

The Insurance Australia Group Ltd (ASX: IAG) share price has been struggling this year. Since the beginning of 2021, the insurance company’s shares have been range-bound between $4.56 and $5.35.

The last week has been no exception, with the IAG share price bouncing between $4.84 and $5.00 apiece.

While investors can take solace in the company’s shares being in the positive year-to-date (YTD), it doesn’t make the last month or so much easier. In that time, the IAG share price has slipped ~5%.

Let’s revisit Australia and New Zealand’s largest general insurance provider and see where the downward pressure is coming from.

Why the IAG share price is under pressure?

As previously reported by my fellow Fool, Nikhil, the latest news from IAG is the finalisation of its FY22 aggregate reinsurance cover.

According to the company, the FY22 aggregate cover provides protection of $350 million in excess of $400 million. Additionally, individual events will be capped at $200 million in excess of $50 million per event.

Furthermore, IAG’s catastrophe cover after allowing for quote share arrangements comes to a maximum event retention of $169 million at 1 July 2021.

Storms rain down on IAG

Zooming out on the IAG share price, the recent storms and floods in Victoria appeared to unleash concern among investors.

The insurance company noted that it had received around 4,300 claims as of 15 June. For the most part, these claims involved property damage.

At the time, the number of claims was expected to climb higher as residents returned and inspected their homes more closely.

IAG’s preliminary estimate indicated that the Victorian floods could lift its FY21 natural perils claim costs between $720 million to $743 million. This would exceed the company’s allowance of $658 million and its previous guidance of $660 million to $700 million.

When it comes to insurance, claims are costs. Therefore, the increased natural perils cost would weigh on profitability.

The post What’s weighing down the IAG (ASX:IAG) share price lately? appeared first on The Motley Fool Australia.

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More reading

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What moved the IAG (ASX:IAG) share price today?

Motley Fool contributor Mitchell Lawler 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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