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An investor’s guide to Insurance Australia Group Ltd

Australia and New Zealand insurer Insurance Australia Group Ltd (ASX: IAG) (“IAG”) is expected to release its interim results for the first half of financial year 2016 next week.

If you’re a shareholder or potential buyer, here’s what you should expect:

  • Update on new brand

New Managing Director and CEO Peter Harmer has begun rebranding IAG to remove ‘Insurance Australia Group’ from its logo to better reflect the group’s regional presence in New Zealand, Indonesia, Vietnam, and Thailand, as well as Australia.

IAG is also looking to strengthen the links between IAG and the brands in its stable in order to better differentiate itself from competitors. Company research shows that customers value knowing who stands behind the insurance brands that they choose. IAG’s brand stable includes NRMA Insurance, CGU, SGIO, SGIC, WFI, and Swann Insurance in Australia.

  • More info on Berkshire partnership risk/profit sharing

Berkshire Hathaway took a 3.7% strategic stake in IAG following a quota-share arrangement last year. As a result, Berkshire will receive 20% of IAG’s Gross Written Premium, and pay 20% of claims. Berkshire will reimburse IAG for its share of operating costs, while paying a ‘percentage-based fee’ (details not disclosed) which ‘recognises the value of accessing IAG’s strong core franchise.’

The upcoming interim report will be shareholders’ first chance to see the actual effects of this agreement in action.

  • More info on international ventures

I have written several times recently about IAG’s under-exposure to our rapidly growing and heavily underinsured neighbours in south-east Asia – next week’s report should include an update on a number of ventures IAG has been developing on this front.

IAG has been aiming to increase its stake in SBI General, an insurance joint venture with the State Bank of India, from 24% to 49% following legislative changes to foreign ownership rules. This deal was expected to finalise by the end of the 2015 calendar year.

IAG also acquired an insurance license in Indonesia, and as of its annual report last August was still seeking a distribution agreement with a recognised local partner. Following feedback from shareholders, IAG canned its plans to expand in China and more information on this may also be forthcoming.

  • $how me the money!

Readers will also, of course, receive an update on revenues, profits, and dividends. As of its most recent quarterly update (non-market sensitive), IAG confirmed it was on track to meet its full year 2016 guidance, which included flat premium growth and insurance margins of 14%-16%.

I have no idea which way shares will head when IAG reports, although since the results are expected to be fairly unremarkable I don’t envision shares making any major movements. Interested buyers might be better off waiting to read the report before making a final investment decision.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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