Why is the IAG (ASX:IAG) share price having a rollercoaster start to the year?

We take a look at what’s happening to the insurance group’s shares so far in 2022.

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The Insurance Australia Group Ltd (ASX: IAG) share price has been up and down like a yo-yo this year but is in the green so far in 2022.

The company’s shares closed today at $4.41, up 3.52% since the start of the year. Today they held steady, gaining 0.23%.

Let’s take a look at what might be impacting investor sentiment.

What’s happening at IAG?

The IAG share price gained 4.69% between market close on 31 December and 4 January. However, it then fell 2.24% between market close on 4 January and 6 January.

On January 7, it recovered this loss, gaining 2.29% before sliding a further 1% to the current share price of $4.41.

News out of the company on its catastrophe reinsurance program on January 6 didn’t seem to get investors too excited.

The insurance company maintained its cap on gross reinsurance protection cover at $10 billion. Meanwhile, the cost of the catastrophe insurance program increased by “single digits”.

Commenting on the announcement, chief financial officer Michelle McPherson said:

Our catastrophe reinsurance program remains an intrinsic part of IAG’s capital management strategy.

The structure of the new program is similar to that of prior years, and we received strong support from our reinsurance partners with whom we have long-term relationships.

The IAG share price ended that day down 0.68% but recovered to post a 2.29% gain the following day.

A broker note out of Morgan Stanley may have also played on the minds of investors. My Foolish colleague James on Wednesday reported the broker thinks IAG needs to increase its insurance pricing to protect its margins from higher natural catastrophe costs including claims inflation.

Analysts at the company have a $3.75 target on the share, a 15% drop on the current price.

However, other brokers, including Morgans, Macquarie, and Credit Suisse, appeared bullish on the IAG share price last week.

IAG share price snap shot

The IAG share price has plummeted 12.5% in the past 52 weeks but is up 0.45% in the past month.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has returned nearly 12% to investors over the longer time frame.

The company commands a market capitalisation of roughly 10.9 billion on the current share price.

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 and has recommended Insurance Australia Group Limited. The Motley Fool Australia has recommended Macquarie 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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