Insurance Australia Group Ltd (ASX: IAG) shares have had an excellent 12 months, rising by around 42%. Clearly, investors are anticipating good things from the company's upcoming report for the six months to December 2024, which is expected to be released this Thursday, 13 February.
IAG is an important company in the Australian economy. Its businesses insure various aspects of Aussie life across the brands NRMA Insurance, CGU, WFI, ROLLiN', AMI, State, NZI, and Lumley.
Late last month, experts at Citi ran the ruler over the insurance giant and provided some insightful commentary regarding what we may see from the business.
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Commentary on IAG shares
According to The Australian, Citi analysts think the upcoming results from both IAG and Suncorp Group Ltd (ASX: SUN) will be "difficult to mask". Their results are expected to be driven by perils losses, and Citi also warned that regulatory risks for general insurers "could be rekindled".
While Citi analyst Julian Braganza believes that regulatory risks remain, he did advise that they could be manageable. He further commented that the focus on insurers had "somewhat reduced" amid a reduction of price rises.
Pleasingly for owners of IAG shares, the Citi analyst believes both IAG and Suncorp are enjoying favourable underlying profit margin increases for their insurance operations, with premium increases in home and motor policies rising faster than overall inflation.
However, out of the two insurance giants, Braganza believes Suncorp is more likely to be the winner on growth metrics because of its "more competitive pricing", which is likely to help it achieve growth at the top end of its guidance range of between 10% to 12%.
The Citi analyst suggests that both Suncorp and IAG can win from a soft summer of weather in both Australia and New Zealand. The recent storms in Sydney are expected to be "manageable".
Both Suncorp and IAG are expected by Citi to deliver a capital return for investors. Owners of IAG shares could benefit from the company unwinding provisions, while Suncorp is expected to deliver the cash from the sale of Suncorp Bank to ANZ Group Holdings Ltd (ASX: ANZ).
Price target
A price target is the price a broker thinks a company's share price will be in 12 months from the time of the investment call.
Citi has a price target of $8.10 on IAG, which was raised from $8.05. That means the broker is suggesting the IAG share price could fall by around 8% from where it is right now.
