The Insurance Australia Group Ltd (ASX: IAG) share price is trading at a 52-week low of $6.95 per share this morning. The Aussie insurer is one of Australia’s largest listed companies with a market capitalisation of $16.06 billion.
But despite the recent capital losses, could the IAG share price be a bargain buy ahead of a turnaround in 2020?
Why the IAG share price is at a 52-week low
The Aussie insurer has been under pressure for a long period of time now. This is largely due to an increased number of natural disasters.
Between devastating bushfires, damaging hailstorms and intense thunderstorms, the ASX insurer’s shares have been struggling. IAG has been hit particularly hard as the largest general insurer in Australia and New Zealand.
The IAG share price slumped lower in January after an earnings update relating to these events. IAG lowered its FY 2020 insurance margin guidance to a 14.5% to 16.5% range. That was a steep discount compared to the group’s previous 16% to 18% range.
CEO Peter Harmer said the group had revised its reported insurance margin guidance “to reflect the recent heavy natural peril activity and a reduced expectation for prior period reserve releases”.
It hasn’t just been the IAG share price under pressure this year though. Fellow insurers Suncorp Group Ltd (ASX: SUN) and NIB Holdings Limited (ASX: NHF) have also slumped lower in the last year or so.
Is now the time to buy?
Despite its struggles, the IAG share price remains an ASX 20 company with a 4.54% dividend yield.
There’s no doubt this summer has put pressure on the insurance sector. Australia’s insurers need to deliver for customers while also maintaining profit margins for shareholders.
I personally think IAG is a bit of a risky bet right now. I’d be waiting until I see the group’s results in February to consider if there is really value to be had.
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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Insurance Australia Group Limited. The Motley Fool Australia has recommended NIB Holdings Limited. 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 Scott Phillips.
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