Why the IAG (ASX:IAG) share price has underperformed the ASX 200 in the last year

It has been a rollercoaster year for IAG shareholders…

The Insurance Australia Group Ltd (ASX: IAG) share price has moved in circles over the past year. This comes as the insurance giant has faced challenging trading conditions caused by the COVID-19 pandemic.

At yesterday's market close, IAG shares finished the day down 0.55% to $5.39 apiece.

A shocked and stressed man looking at his laptop and trying to absorb bad news about the Netwealth share price falling

Image source: Getty Images

What's going on with IAG shares?

There are a couple of possible catalysts as to why the IAG share price has failed to produce decent gains over the last 12 months.

In mid-August, the company released its full-year results, revealing mostly a good performance.

Gross written premium (GWP) lifted 3.8% over the prior corresponding period to $12,135 million. This predominately was rate-driven along with customer growth across Australia and New Zealand.

Insurance profit jumped 35.9% to a total of $1,007 million due to further net reserve strengthening and a positive credit spread impact.

Cash earnings also increased 170% to $747 million, excluding unusual items.

However, IAG's bottom line came to a reported net loss after tax of $427 million. This was blamed on significant one-off corporate expenses mainly relating to business interruption, customer refunds, and payroll remediation.

In addition, IAG recently announced that CMC Hospitality has filed an application starting a representative proceeding in the Federal Court.

The company has not been served with the application and isn't aware of the detailed nature of the application. Although, it appears to relate to insureds who hold policies with CGU and business interruption losses related to COVID-19.

How does the IAG share price compare to the ASX 200?

Over the last 12 months, the IAG share price has gained 10%, with year-to-date up around 14%. The company's shares have lost almost 40% of its wealth since July 2019, particularly when COVID-19 hit.

In contrast, the S&P/ASX 200 Index (ASX: XJO) has gained 25% from this time last year and is up 14% year-to-date. The ASX 200 also reached a record high of 7,632 points in mid-August.

Based on today's price, IAG presides a market capitalisation of roughly $13.2 billion, with approximately 2.4 billion shares on issue.

Motley Fool contributor Aaron Teboneras 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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