Key points
- The IAG share price traded up today
- IAG has made a solid start to the year having rallied as much as 6% in this time
- Most of the brokers covering the company have IAG as a buy right now
- Over the last 12 months, shares are still down more than 13%
The Insurance Australia Group Ltd (ASX: IAG) share price finished less than 2% in the green today at $4.34 apiece.
In fact, IAG has made a solid start to the year, amid the market turbulence that's ensued since January 1. Shares are up almost 2% since then, having rallied as much as 6%.
As seen on the chart below, IAG was matching the S&P/ASX 200 Financials Index (XFJ) until the new year, where it then crossed over and took off. The company now leads the index after trailing it for the entirety of 2021. That could be important, as IAG is now generating its own return separate from the market return.
With a shifting regime in macroeconomic policy abundantly clear, investors are wondering where might be the best place to protect their hard earned capital.
We've gone to the experts to see what the current sentiment on IAG is, and from what it appears, the outlook is overwhelmingly bullish. Let's take a look.
IAG is a buy, these brokers say
Credit Suisse expect IAG to outperform this year and rates it as a buy, valuing the company at $5.94 per share in a January note.
The broker reckons that IAG should absorb any peril costs well this year and is attracted to the insurance giant's valuation on current figures.
Citi reckons IAG is a buy now as well, noting that the company's share price is coming off a low base in 2021 and should perform better in 2022.
Meanwhile, the team at investment bank JP Morgan are also constructive on IAG shares and advocated clients to load up on the company in a note from this month.
The broker values IAG at a premium of $5.45 per share and feels that sentiment will improve given a number of sub-factors regarding the company's earnings profile.
"IAG has a strong position in the Australian and NZ personal lines market, but has suffered in recent times from concerns around COVID-19 Business Interruption losses and concerns on market share losses in personal lines", JP Morgan says.
"Short- to medium-term margin pressures have proved challenging for IAG, including higher reinsurance costs, lower yields, higher natural perils and reducing reserve releases".
But the macro-environment could be improving for IAG, says JP Morgan. With the interest rate cycle looking set for a change in regime, the broker reckons that these points could be a net positive for IAG.
"The cycle is turning favourable for IAG in the commercial lines segment", the broker added, noting that the "favourable [business interruption] BI second test case ruling suggests possibly a very large release" of approximately $1.2 billion to the company.
Each of Macquarie, Jarden and Morgans also rate IAG as a buy right now, valuing the company at $5.10, $5.50 and $5.23 per share respectively.
In fact, in a list of analysts provided by Bloomberg Intelligence, approximately 67% of firms have IAG as a buy right now, whereas just 16.7% each have it as a hold and sell.
A bit more on the IAG share price
The consensus valuation derived from this list is $5.19 per share, implying a 19% upside potential at the time of writing should the bull thesis play out.
IAG shares have started the year well and are climbing nicely into the green since January 1. However, over the last 12 months, shares are still down more than 13%.
