The Insurance Australia Group Ltd (ASX: IAG) share price has delivered an incredible return in 2024, rising by 50%, as shown on the chart below. Investors may be wondering if the ASX blue-chip share is capable of delivering impressive returns in 2025.
IAG is one of the largest insurers in Australia and New Zealand, with brands such as NRMA Insurance, CGU, WFI, ROLLiN', Swann Insurance, AMI, State, and NZI.
The company has benefited from the recent period of inflation due to higher premiums. But, inflation in Australia has reduced compared to 2023.
Let's look at what IAG is expected to achieve in 2025, which could be very influential on the IAG share price.
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Commentary on the ASX financial share
According to the broker UBS, the company recently held its 2024 investor day and told the market about organisational initiatives that "lay the foundations for growth".
UBS noted that technology is the "key enabler" here, with the progressive migration of its retail migration of retail and commercial divisions to new trans-Tasman platforms on track to deliver an approximate 100 basis point (1.00%) expense ratio reduction by FY27.
The broker noted that rather than raise its return on equity (ROE), the company is looking to recycle its productivity benefits into growth. UBS also believes that enhanced scale efficiencies could help IAG pursue new partnerships like the RACQ one with other motor clubs, original equipment manufacturers (OEMs), financial institutions and mutuals.
UBS noted that IAG expects the significant digital uplift and cost opportunity ahead for Intermediated Insurance Australia (IIA – CGU and WFI) to support improved market share and incremental margin upside even as the commercial pricing cycle slows. IAG also thinks there is potential for further capital optimisation at IIA.
On the growth investing, UBS recently said:
We expect this to assist IAG's competitive positioning as the pricing cycle slows, particularly in commercial given IAG's expense ratios remain well above peers, and to support further partnership opportunities in retail and potentially further down the track in commercial. However, value appears limited at a 19.4x PE, supporting our Neutral rating.
Financial predictions for IAG shares
UBS is projecting that IAG could generate $1.13 billion of net profit after tax (NPAT) in the 2025 financial year.
The broker is also predicting that the insurance giant could generate 46 cents of earnings per share (EPS), which puts the current IAG share price at 18x FY25's estimated earnings.
It's projected to pay a dividend per share of 29 cents, which translates into a forward dividend yield of 3.4%, excluding franking credits.
UBS currently has a price target of $8.55 on IAG shares, which implies that if the broker is correct, the insurance giant may only slightly rise over the next year.
