Insurance Australia Group Ltd (ASX: IAG) is one of Australia's largest general insurance companies, providing products like car, home, and business insurance.
IAG owns well-known brands such as NRMA Insurance, CGU, and SGIC, among others.
At the time of writing, IAG's share price is down 10.30% in 2025.
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Why have IAG shares tanked this year?
Long term holders of IAG shares have still enjoyed strong returns over the past year.
It is up more than 20% over that period.
However the insurance company saw its share price crash over the course of a few days in February (more than 15%) on the back of earnings season news.
Although IAG delivered a 91.2% increase in net profit after tax to $778 million, investors seemed disappointed with its second half projections.
IAG share price fell on results day
- Gross written premium (GWP) up 6% to $8,426 million
- Net earned premium up 9.7% to $4,930 million
- Insurance profit up 55.9% to $957 million
- Net profit after tax up 91.2% to $778 million
- Interim dividend per share up 20% to 10 cents
The insurer noted that the increase was,
mainly driven by the $140m post-tax release of the COVID Business Interruption provision, an increase in net earned premiums, and an improvement in the insurance profit
IAG's interim dividend per share was also up 20% to 10 cents.
However, Goldman Sachs was forecasting an interim dividend of 14.2 cents per share.
Does the current share price reflect its value?
On face value, IAG posted seemingly strong results in its HY 2025 results.
It would seem brokers tend to agree the company is slightly undervalued right now based on its earnings season results and current share price.
Broker Bell Potter has a current target price of $8.33 per share. This suggests a 8.75% upside based on the current share price of $7.66.
Similarly, online brokerage platform SelfWealth has an "undervalued" tag on IAG with an average share price target of $8.56.
Future outlook
IAG management has expressed confidence in the company's financial setting, targeting a net profit margin of
around 15% and ROE of 14% to 15%.
They emphasised a continued focus on growth and maintaining pricing discipline.
Forecasts from Bell Potter show revenue is expected to grow in 2026 (+7.43%) and 2027 (+4.64%).
Last year IAG also invested heavily in the integration of a new Retail Enterprise Platform. More than 3 million policies
migrated to the new digital platform resulting in significant increase in customer satisfaction.
Managing Director and CEO Nick Hawkins said the platform would allow IAG the ability to better price and manage risk.
So, is IAG a buy?
The company is seemingly committed to innovation and growth, and posted strong earnings results last month. However as suggested by the company itself, this was influenced by the COVID Business Interruption provision.
Based on forecasts from brokers, IAG shares are slightly undervalued, but punters should temper their expectations if they expect lofty returns.
