ANZ insurance company Insurance Australia Group Ltd (ASX: IAG) (“IAG”) today became the latest company, alongside Telstra Corporation Ltd (ASX: TLS), to successfully repurchase shares from shareholders at below recently traded prices.

IAG recently announced plans to buy back between 2.2% and 2.45% of its total shares on issue and the results of that buyback were released to the market this morning. Participation appears to have been strong, with approximately 2.6% of IAG’s total issued capital being bought back, more than what was originally expected. Continuing shareholders should expect to see a corresponding rise in earnings per share this year.

(Telstra’s buyback was also massively oversubscribed, with the company having to scale back tenders by a whopping 84% in order to proceed. Telstra successfully bought back 2.3% of its issued capital.)

What’s next for IAG?

Reading between the lines, I think what we’re seeing with IAG is a company that’s having trouble finding good places to deploy capital. It’s recently increased its dividend payout ratio and paid out a special dividend, in addition to the above share buyback. As one of the largest players in the ANZ insurance market, it’s a tough job to expand organically – some market commentators have suggested that acquisitions could be on the cards.

Management has focused on reducing its capital requirements through agreements like the recent quota shares with Berkshire Hathaway and Munich Re. There’ll also be significant investment in tackling outdated business systems in the coming years, as IAG looks to take a big step forward into the digital world.

In the recent results presentation, management declared that a combination of scale advantages, innovation and improved efficiency would lead to a ‘top quartile TSR’ (Total Shareholder Return), partly thanks to IAG’s big dividend.

It is an attractive – and fairly defensive – business with good cash generation potential. Unfortunately IAG shares today are carrying the kind of price tag usually associated with more growth-oriented businesses – and growth is something IAG will have trouble delivering in the next few years. I’d be inclined to leave this one on the watch list to wait for a more attractive price.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. 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.