Own IAG (ASX:IAG) shares? Here’s what to look for during reporting season

Here’s some of what investors will be watching for the Aussie insurer in August.

| More on:
ASX share price on watch represented by surprised man with binoculars

Image source: Getty Images

Insurance Australia Group Ltd (ASX: IAG) shares have been picking up momentum in recent days. Shares in the Aussie insurance company climbed 2.2% higher on Monday and are up 5.9% in the last 5 days.

August is looming large right now, and that means the full-year reporting season is nearly upon us. Here are a few things to watch out for if you’re an IAG investor.

What reporting season could mean for IAG shares

IAG is the largest general insurance company in Australia and New Zealand. That means investors will be wanting to see signs that are good for the general insurance industry, such as higher premiums, low likelihood of payouts and a clear future strategy.

It’s worth noting that IAG has already provided its preliminary FY2021 results to the market. IAG shares climbed higher last week following the financial update ahead of the group’s full-year results.

The Aussie insurer flagged a statutory net loss but claimed many “unusual items”. IAG expects to report gross written premium (GWP) growth of 3.8% with net earned premium up 1.5% on FY2020 to $7,473 million.

The insurer’s underlying insurance margin is expected to fall 130 basis points to 14.7% with a $427 million reported net loss, down from a $435 million net profit in FY2020.

However, managing director and CEO Nick Hawkins said the financial results are “sound and within expectations”. COVID-19, additional expenses from a new operating model and losses in New Zealand were all cited as temporary factors weighing on the group’s performance.

IAG shares will certainly be worth watching in August. The group will release its full-year audited results on 11 August 2021. It may also be worth keeping an eye on other Aussie insurance results for signs of deteriorating conditions such as higher average claims or net natural perils claim costs.

Suncorp Group Ltd (ASX: SUN) and QBE Insurance Group Ltd (ASX: QBE) are two that spring to mind. Reviewing a cross-section of the Aussie insurance market could help provide insight into the prospects for IAG shares in the year ahead. Analysing financial results and qualitative commentary across these three entities could provide a broader perspective of how the industry is faring going into FY2022.

Foolish takeaway

IAG shares have struggled in the last 12 months, edging 0.4% lower to $5.02 per share. However, IAG has already flagged an increase in FY2022 underlying margin which may have investors hoping for a good year ahead.

Investors will be watching the IAG full-year result commentary closely as well as results from fellow Aussie insurers in August.

Should you invest $1,000 in IAG right now?

Before you consider IAG, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and IAG wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Financial Shares