The IAG (ASX:IAG) share price has dropped this last week. Here’s why

Several catalysts in the last year have made it tough for the IAG share price to recover.

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The past week has not been kind to the Insurance Australia Group Ltd (ASX: IAG) share price.

Since the start of the COVID-19 pandemic, numerous catalysts have heaped pressure on the IAG share price.

Let’s take a look at why shares in Australia’s largest insurer have been struggling.

IAG share price suffers on outlook

Many investors and shareholders in IAG will be looking at how the company has performed for the year.

Shares in the insurer came under pressure last week after releasing a preliminary set of results for the full year.

Judging by the price action, investors were less than impressed.  

The insurer flagged a statutory net loss of the full year, down from a $435 million net profit in FY 2020.

IAG also expects to report gross written premium growth of 3.8% and an underlying insurance margin of 14.7% for the year.

In its preliminary report, the company cited corporate expenses of $1.51 billion in FY 2021, including a $1.15 billion business interruption provision.

IAG is slated to report its earnings on Wednesday 11 August.

More on the IAG share price

In addition to struggling this past week, the IAG share price has not enjoyed a good year thus far.

Since the start of the year, shares in the insurer are trading around 4.5% higher.

Compared to the S&P/ASX 200 Financials Index (ASX: XFJ), which is up more than 19% for the year, the IAG share price has been lagging severely.

Several catalysts have made it tough for the IAG share price to recover.

IAG was on the receiving end of an unsuccessful court case in New South Wales last year. The landmark court case sought to exclude pandemic lockdowns from business interruption policies.

Shares in the insurance giant also came under pressure in mid-June, following flood events in Victoria.

The Victorian floods were the third major claim this year following previous floods in New South Wales and Cyclone Seroja in Western Australia.

For FY 2021, IAG’s net costs for natural disasters are approximately $660 million, having budgeted for only $658 million in natural disaster claims at the beginning of the financial year.

Shares in IAG closed yesterday’s trading session at $4.87.

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Motley Fool contributor Nikhil Gangaram 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.

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