Insurance Australia Group Ltd shares fall 3%: Should you be worried?

Investors in Insurance Australia Group Ltd (ASX: IAG) felt more pain on Monday when the company’s share price fell 3% in early trade. The fall extended losses since early September to over 11%.

IAG’s shares peaked at $6.61 on September 3 before plunging 32 cents on September 8 when the company went ex-dividend (26 cents). Since then there has been deafening silence from the company, however the group’s 3.6% fall in share price has actually been less than the 6% fall in the wider ASX 200.

Attractive Price

Following the recent fall, IAG is trading on an attractive trailing price to earnings ratio of just 10.6, however analysts are forecasting group earnings per share to fall by up to 21% next year following the issuance of new shares and debt to purchase Wesfarmers’ insurance arm. Earnings are expected to rebound in the 2016 financial year by between 7% and 10%, which could make the next six months an interesting ride for shareholders.

The insurance industry in Australia is mature and crowded with large, dominant companies. As a result, competition is fierce and growth is hard to find. Long-term investors would be better suited looking for opportunities in the high-growth tech space.

The Motley Fool has just released a special video report on our analysts' #1 ASX tech pick -- all about the one Australian company poised to win big from the 'cloud computing' trend. (Hint: The shares are already up over 100%!) Click here to claim your FREE copy.

Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned. You can find Andrew on Twitter @andrewmudie

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