Here’s why the IAG (ASX:IAG) share price is down 16% in a month

It’s been a wobbly ride for IAG investors recently.

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Scared people on a rollercoaster holding on for dear life, indicating a plummeting share price

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The Insurance Australia Group Ltd (ASX: IAG) share price has suffered a sharp fall over the past month. This is nothing new, however. Its shares have been on a rollercoaster ride since COVID-19 arrived on the world stage.

At the end of today’s market session, the insurance giant’s shares finished down 0.22% to $4.45 apiece. This means that the IAG share price has fallen by more than 16% since this time last month.

How has IAG performed recently?

The IAG share price has continued to decline since its most recent trading update in early November.

The company told investors it was expecting a rise in net natural perils claim costs for FY22. Severe storm and hail activity experienced in South Australia and Victoria during October were the cause.

In total, net natural perils claim costs for the current financial is forecasted to be around $1,045 million. This is a significant increase from the company’s previous estimates of $765 million.

IAG was forced to downgrade its FY22 insurance margin guidance range between 10% to 12%. Originally, the insurance margin level was in the 13.5% to 15.5% range. Lower vehicle claims made by customers were partly offset by inflationary pressure on claims costs in the company’s motor and home portfolios.

Pleasingly, gross written premium (GWP) improved in the first quarter of FY22, lifting in the mid-single-digit range.

While still trying to navigate its way through the tough trading conditions, IAG was recently hit with civil penalty proceedings.

The Australian Securities and Investments Commission (ASIC) took the embattled insurance company to the Federal Court of Australia over IAG’s failure to pass on the full discounts to a large number of NRMA customers. This relates to policyholders to took up NRMA Home, Motor, Caravan and Boat Insurance between March 2014 and September 2019.

IAG did self-report the issue to ASIC when it conducted a review in 2019 and has since embarked on a remediation program.

About the IAG share price

It’s been a rollercoaster ride for IAG shares, having moved unpredictably over the past 12 months. Its shares are currently down 15% since this time last year, and down 5% in 2021.

Based on valuation metrics, IAG has a market capitalisation of around $11.02 billion, with approximately 2.47 billion shares on issue.

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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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