Why did the IAG share price smash the market today?

Investors gave this insurer a nice premium today.

| More on:
A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

After a strong start this morning, it ended up being a pretty subdued day for the S&P/ASX 200 Index (ASX: XJO). The ASX 200 ended up finishing this Tuesday with a mild 0.12% gain. But it was a very different story for the Insurance Australia Group Ltd (ASX: IAG) share price.

IAG has had a cracking session. The ASX 200 insurance giant finished the day at $5.67 a share, up a healthy 1.61%. So we can easily say this company was a bonafide market beater, even if, as Bowie might put it, just for one day.

So what was behind IAG shares' smashing Tuesday?

Why did the IAG share price smash the ASX 200 today?

Well, it's hard to know for sure. But we did get an important piece of news out of the company that may be at least partially responsible.

We've just seen the release of a comprehensive report by the Insurance Council of Australia (ICA), of which IAG is a member, into the devastating floods in Queensland and New South Wales in 2022.

The report examined the operation of eight insurance companies, including IAG, during the crisis. IT found that, on the whole, the Australian insurance industry failed community expectations in a number of areas. These included a finding that the floods "exposed areas of weakness in insurers' claims and complaints handling responses". Further, it noted that "there is more work to be done to improve policyholder outcomes".

In response, IAG released an ASX announcement today that addressed this report's findings.

In this response, IAG CEO Nick Hawkins had this to say:

The Deloitte report is an important opportunity for us and the industry to acknowledge where our response to these devastating floods could have been better and, through the recommendations, take the necessary steps to ensure we're better prepared for future events, so that our customers experience the best possible service and support.

Over the past 12 months we have made a number of changes. These include better customer communications during major events, the speeding up of the building and repair processes and streamlining the claims process for customers.  Guided by this report, more will be done.

It's worth noting that the report did not single out IAG, nor any other single insurer, for either direct criticism or praise. But, judging by the response from investors this Tuesday, it seems as though most have been impressed with IAG's response.

Today's share price gains put IAG shares up a rosy 21.67% over 2023 to date, and by 13.86% over the past 12 months.

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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Financial Shares

An older couple use a calculator to work out what money they have to spend.
Superannuation

AMP shares lower amid industry 'wave' of superannuation payouts to baby boomers

New APRA figures show a surge in superannuation benefits paid in lump sums and pensions.

Read more »

a man with a moustache sits at his computer with his hands over his eyes making a gap between his fingers so he can peek through to his computer screen.
Financial Shares

Are AMP shares a significantly underrated buy right now?

AMP shares are unloved. Could it be a contrarian opportunity?

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Financial Shares

IAG share price teases 4-year high amid cyber expedition

This insurance giant is partnering up industry leaders to cover the costly damage from cyberattacks.

Read more »

A man on a phone call points his finger, indicating a halt in trading on the ASX share market.
Mergers & Acquisitions

Why this under-the-radar ASX 200 stock is in a trading halt

It looks like this top 200 company is ready to splash some cash again.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Financial Shares

What this top broker is saying about IAG shares

IAG shares are trading close to their four-year highs.

Read more »

Woman and man calculating a dividend yield.
Financial Shares

Here is the dividend forecast to 2026 for AMP shares

AMP could be a viable source of dividends. But how much will it pay?

Read more »

Keyboard button with the word sell on it.
Financial Shares

Why Goldman Sachs just slapped a sell rating on this ASX 200 stock

This blue chip has been hit with a sell rating. But why?

Read more »

Accountant woman counting an Australian money and using calculator for calculating dividend yield.
Financial Shares

If you'd invested $10,000 in Netwealth shares at the start of the year, here's how much you'd have now

Would it have been a good idea to buy Netwealth shares on 2 January?

Read more »