Why is the IAG share price smashing the ASX 200 today?

How are IAG shares managing to stay green this Tuesday?

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Key points

  • The ASX 200 is getting hammered today 
  • This has seen most ASX 200 shares lose significant skin 
  • But IAG is a prominent exception. Why? 

It’s been a day of carnage for the S&P/ASX 200 Index (ASX: XJO) and most ASX 200 shares. As it currently goes, the ASX 200 is down by a shocking 4.14% and is back to just over 6,600 points. But while most ASX 200 shares have copped a commensurate beating alongside the ASX 200, that is most certainly not the case for the Insurance Australia Group Ltd (ASX: IAG) share price.

IAG shares are defying the market’s gloom today. This insurance company is actually in the green, up 0.12% so far today to $4.18 a share. Considering the ASX 200 is down by 4.14%, this means that the IAG share price is outperforming the market by more than 4% – a mean feat for any share at any time.

IAG started the day deep in the red, opening at just $4.02 a share after closing at $4.18 last week. But the company’s fortunes improved throughout the day to the point we see now.

So how are IAG shares managing to pull this comeback off?

How is the IAG share price bucking the ASX 200 today?

Well, we can’t be too certain. IAG hasn’t released any news or announcements directly today (or indeed this month yet).

But what we do know is that IAG shares have been attracting some significant love from some expert investors lately, which could be helping to save the company from the market’s falls today.

Last month, we covered how Michael Maughan of Tyndall Asset Management named insurance companies like IAG as some ASX shares which have significant pricing power, and thus are inherently well-placed to weather the effects of inflation. Here’s some of what Mr Maughan said on IAG:

This current inflationary environment has seen bond yields rise and expectations increase for significant cash rate rises. This means that the interest earnings on the premium float of insurers are rising and will add meaningfully to profits.

But Tyndall Asset Management isn’t the only ASX expert bullish on IAG right now. Last week, we also covered the views of David Cassidy, head of investment strategy at Wilsons. He singled out IAG as his pick of the ASX insurers. Here’s why:

IAG has traditionally been a high-quality insurer, although this has been tested over the past 2 years with COVID, bushfires and perils… We think IAG’s turnaround is on track, and this should lead to strong earnings growth over the next 12 months.

So perhaps investors are taking these kinds of views to heart today, and have chosen to flock to IAG shares in the face of such a brutal market downturn today.

Whatever the reasons for IAG’s strong showing this Tuesday, no doubt investors will be thanking their lucky stars.

At the current IAG share price, this ASX 200 insurance share has a market capitalisation of $10.3 billion, with a dividend yield of 3.17%.

Motley Fool contributor Sebastian Bowen 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 has positions in 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 Scott Phillips.

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