Why is the IAG (ASX:IAG) share price underperforming QBE in 2021?

While the IAG share price has struggled through 2021, that of QBE has surged
The post Why is the IAG (ASX:IAG) share price underperforming QBE in 2021? appeared first on The Motley Fool Australia. –

The Insurance Australia Group Ltd (ASX: IAG) share price is having a rough year, but the same can’t be said for its major competitor.

While the IAG share price has slumped 9% since the start of 2021, that of QBE Insurance Group Ltd (ASX:QBE) has gained 32%.

That’s despite what seems to be the major catalyst of IAG’s tumble having hit both insurance giants.

At the closing bell on Friday, the IAG share price was $4.27, up 0.23%.

For context, the S&P/ASX 200 Index (ASX: XJO) increased 0.44% today and is up 11% over 2021 so far.

Let’s take a look at why IAG has been underperforming its fellow insurance provider lately.

What’s weighed on the IAG share price in 2021?

Looking back to late 2020, both IAG and QBE were caught up in the headlines when the New South Wales Court of Appeal found insurers must pay out business interruption insurance claims for losses caused by COVID-19.

Interestingly, while QBE sat quietly following the ruling, IAG halted its share price as it underwent a $750 million capital raise. The extra funds were needed to strengthen its balance sheet in the face of impending payouts.

As a result, QBE sailed out of the findings relatively unscathed. Meanwhile, IAG is now expecting to be hit with a class action regarding its disclosure of information of the case.

A law firm representing IAG shareholders expects to file the class action in the Supreme Court of Victoria in the new year. It claims IAG failed to communicate the likelihood the New South Wales Court of Appeal would find in favour of policyholders.

Fortunately (or unfortunately), IAG will be well versed in the courtroom by then. Legal action against the company was brought about by the Australian Securities and Investments Commission (ASIC) in October.

ASIC claims the insurer increased NRMA customers’ premiums before applying loyalty and ‘no claim’ discounts. It alleges this cost at least 596,000 policyholders more than $60 million in total.

Not to mention, IAG recently downgraded its guidance for financial year 2022 after wild weather thrashed parts of Australia in October.

While all this weighed on the IAG share price in 2021, QBE’s stock continued to trend upwards.

Sadly, brokers are predicting more pain for IAG in 2022. Meanwhile, experts are bullish on the future of QBE’s shares.

The post Why is the IAG (ASX:IAG) share price underperforming QBE in 2021? appeared first on The Motley Fool Australia.

Should you invest $1,000 in QBE Insurance right now?

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Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and QBE Insurance wasn’t one of them.

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More reading

Where are QBE (ASX:QBE) shares headed in 2022?

Why is the IAG (ASX:IAG) share price heading south today?

What are experts saying to expect for the IAG (ASX:IAG) share price in 2022?

It’s trading at around 9-year lows, could the IAG (ASX:IAG) share price be a takeover target?

3 ASX shares to buy before Xmas (hint: one predicted to rise 41%)

Motley Fool contributor Brooke Cooper 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 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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