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.

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The Insurance Australia Group Ltd (ASX: IAG) share price is nearing a new multi-year high today.

It's shaping up to be a good day for the financials sector as we head into the final hours of Wednesday trading. One of the positive performers is Sydney-based IAG, the insurance giant behind well-known names such as NRMA Insurance.

Shares in the company are within shooting distance of a four-year high after announcing a new product this morning.

At the time of writing, the IAG share price is fetching $6.47 apiece, only 7 cents away from its highest price since before the COVID crash, as depicted in the chart above.

Covering a multibillion-dollar market

Insurance Australia Group, or IAG, has launched Cylo today, a new specialist cyber underwriting agency. The brand-spanking new offering is backed by IAG's CGU Insurance, a leading commercial, rural, and personal lines insurer with more than 165 years of history.

On its website, Cylo describes itself as a 'holistic risk management approach to the growing threat of cyber incidents.' In essence, Cylo is an amalgamation of insurance and protection. By partnering with UpGuard, a cybersecurity risk management software provider, customers will be assisted in managing vulnerabilities.

From there, CGU partnered with claims management firm Crawford & Company to carry out the incident response side of the equation.

However, this new offering has limitations. Big businesses will need to look elsewhere, as Cylo's protection is only available to small businesses turning over less than $10 million in a year. While those eligible can elect for either first-party or third-party cover.

As mentioned in the official announcement, the Insurance Council of Australia estimates that cybercrime costs the Australian economy $42 billion a year. Small businesses are the recipients of 43% of those costly attacks, averaging $39,000 in damages per cyberattack.

Is the IAG share price undervalued?

With the market approaching a four-year high, is there still enough meat on the bone for a buyer? As my colleague Bronwyn Allen discussed last week, Nigel Pittaway of Citi seems to think so.

The Citi analyst believes IAG presents better value than Suncorp Group Ltd (ASX: SUN). Sticking a $6.75 price target on IAG shares, Pittaway thinks cost-cutting is an avenue for more upside. Meanwhile, analysts at UBS prefer QBE Insurance Group Ltd (ASX: QBE) in the general insurance domain.

IAG shares trade at a price-to-earnings (P/E) ratio of nearly 21 times. However, with earnings forecast to grow over the next 12 months, the forward P/E ratio is sitting at 17 times, which would still value the company at a premium compared to QBE and Suncorp.

Motley Fool contributor Mitchell Lawler 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.

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