Here's why the IAG (ASX:IAG) share price is down 3% in a week

What's dragging the IAG share price down?

| More on:
Person sitting on couch with computer on lap whilst flood waters rise around ankles

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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

Shares in the insurer have sunk more than 3% from an opening price of $5.46 on 25 August to $5.29 at the closing bell yesterday.

Let's take a look at why the IAG share price has taken a tumble.

What's weighing down the IAG share price?

There are several catalysts that could explain why IAG shares have struggled this past week.

Since the company hasn't released any price-sensitive news during this period, it's important to consider the overall price action.

Leading into the past week, shares in IAG had surged more than 12% for the month of August. As a result, it could be assumed that investors might be cashing in their profits.

In addition, the IAG share price could be under pressure after its competitor Steadfast Group Ltd (ASX: SDF) raised $200 million to expand its presence.

Investors could also be re-rating the IAG share price following its full-year results.  

How did IAG perform in FY21?

For the year ending 30 June 2021, IAG reported a statutory loss of $427 million for the full year.

Other notables from the insurer's full-year report included:

  • Gross written premium (GWP) increased 3.8% to $12,135 million
  • Insurance profit up 35.9% to $1,007 million
  • Underlying insurance margin down 130 basis points to 14.7%
  • Reported insurance margin up 340 basis points to 13.5%
  • Cash earnings up 170% to $747 million
  • Full-year dividend doubled to 20 cents per share.

IAG highlighted a 35.9% increase in its reported insurance profit of $1,007 million. The insurer cited lower natural perils costs, positive credit spreads and lower motor claims for the improved margins.

However, IAG noted that significant one-off corporate expenses had resulted in the company reporting a net loss for the year.

Snapshot of the IAG share price

Despite struggling this past week, shares in IAG have enjoyed a strong year thus far. Since the start of 2021, shares in the insurer are trading about 12% higher.

However, shares in IAG are lagging far behind the broader S&P/ASX 200 Financials Index (ASX: XFJ), which is up more than 21% year to date.

Following a disastrous 2020, several catalysts have made it tough for the IAG share price to recover.

Of note, 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.

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 Australia has recommended Steadfast Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why 29Metals, Brainchip, Platinum, and Premier Investments shares are falling today

These ASX shares are having a tough time on hump day.

Read more »

Man with his head in his head because of falling share price.
Share Fallers

Why 29Metals, Atlas Arteria, IDP Education, and Mineral Resources shares are falling

These ASX shares are having a tough time on Tuesday. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why ALS, EOS, NRW, and Patriot Battery Metals are dropping today

These ASX shares are starting the week in the red.

Read more »

A man looking at his laptop and thinking.
Technology Shares

Why are these ASX tech shares getting smashed today?

Owners of these two stocks are missing out today.

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why AGL, Brickworks, IGO, and New Hope shares are dropping today

These ASX shares are having a poor session. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Amcor, Arafura, Brainchip, and South32 shares are tumbling today

These ASX shares are having a tough time on hump day. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Aussie Broadband, Liontown, Metals Acquisition, and Seek shares are falling

These ASX shares are having a poor session. But why?

Read more »