How did the IAG share price compare to its sector in the March quarter?

We take a look at how IAG shares have travelled against the financial sector.

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Key points

  • IAG shares nudged 0.46% higher to $4.35 on Thursday 
  • The company's shares have underperformed against the financial sector over the last three months, down 3% vs. up 3%, respectively 
  • IAG has been impacted by severe weather events earlier in the year 

The Insurance Australia Group Ltd (ASX: IAG) share price has failed to outperform the market in recent times.

This follows the company’s largely disappointing half year result in February despite announcing an earnings upgrade for FY22.

It appears that the insurance giant is struggling with positive investor sentiment for the time being.

At market close on Thursday, IAG shares fetched $4.35, up 0.46%.

What’s happened to IAG recently?

Investors have taken the IAG share price to levels stretching back to October 2020.

Recently, the company provided an update regarding the heavy rains impacting Australia’s east coast.

During early March, IAG advised it received more than 24,000 claims across southeast Queensland and New South Wales. Although that was the latest figures, management noted that the number of claims was expected to rise in due course.

While strong weather continued to hit the eastern seaboard, IAG reassured investors that it has extensive reinsurance protection in place.

Current estimates of the net claims cost from the storm and flooding event were projected to be approximately $74 million. Pleasingly, this is lower than the $95 million forecast disclosed in early March due to development on previous claims.

As such, IAG has utilised roughly $95 million of the $236 million of aggregate cover following the weather-related event.

Consequently, the company has increased its expectation for FY22 net natural perils claims costs to approximately $1.1 billion. Previously that number stood at an estimate of $1.045 billion.

Nonetheless, IAG reaffirmed its reported margin guidance range between 10% to 12% for FY22.

However, given the increase in estimated net natural perils claims costs, the lower half of the guidance range is more likely.

How does the IAG share price compare to the financial sector?

Over the last three months, the IAG share price has moved 3% lower, with year to date up almost 2%. The company’s shares hit a multi-year low of $4.17 in March 2022, before moving in circles.

In contrast, the S&P/ASX 200 Financials Index (ASX: XFJ) has gained 3% from this time 12 weeks ago and is up 4% in 2022. This is a sharp contrast to when the sector registered a 52-week low of 6,017 points also in early March.

Undoubtedly, IAG shares are lagging behind the Financial Index which has continued to rebound over the past 3 months.

Based on today’s price, IAG commands a market capitalisation of roughly $10.69 billion, with approximately 2.47 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 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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