Insurance Australia Group Ltd (ASX: IAG) shares managed to recover a little under 3% on Thursday after the stock tumbled 8.5% a day earlier.
The general insurer blamed an "increasingly competitive environment" for its 9.8% decline in net profit for the six months ended December, while its underlying margin also took a hit as a result of its purchase of Wesfarmers Ltd's (ASX: WES) insurance underwriting arm. The stock trended as low as $5.73 following the report but has since recovered to be trading at $6.03 this afternoon.
Despite the somewhat disappointing report; Insurance Australia Group is still doing a reasonable job of maintaining its margins and the synergies from the Wesfarmers business likely won't be recognised for at least another 12 months.
With the stock trading at just 13x this year's forecast earnings, it's expected to yield 6.3% fully franked or a massive 8.9% dividend when grossed up for franking credits. Given the current low interest rate environment, this stock is certainly worth a closer look.
