Insurance Australia Group Ltd (ASX: IAG) shares are marginally higher on Thursday at $8.50 per share, up 0.12%.
IAG shares are underperforming the benchmark S&P/ASX 200 Index (ASX: XJO), which is up 0.55% and reached a new record earlier.
The ASX 200 financial share rose by 2.2% in early trading yesterday after the general insurer released its full-year FY25 results.
However, IAG shares lost their mojo after lunchtime yesterday and retraced their gains to finish even at $8.49.
So, what do the professionals think of IAG's FY25 results?
Today, top broker Macquarie released a note updating its rating and 12-month price target for IAG shares.
But before we get to that, here's a quick recap of IAG's results.
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IAG profit soars 50% in FY25
IAG reported a 51.3% year-over-year increase in net profit after tax (NPAT) to $1.36 billion.
The company's insurance profit was $1.74 billion, up 21.2% on FY24.
The gross written premium (GWP) rose 4.3% year over year to $17.11 billion. The net earned premium lifted 8% to $9.98 billion.
IAG paid out $10.2 billion in claims in FY25.
Its Common Equity Tier 1 (CET1) capital of $3.94 billion is up 17% from FY24.
IAG shares will pay a final dividend of 19 cents per share with 40% franking.
This is an 11.8% increase from last year's final dividend.
The full-year dividend for FY25 was 31 cents per share, up 14.8% from FY24.
CEO Nick Hawkins said all divisions of the company delivered a positive financial and operational performance.
He said IAG's profit bounce was also due to fewer natural disasters over the 12 months and strong investment markets.
Hawkins said:
We have successfully set our business for growth, investing to create a scalable business which enables us to grow quickly and efficiently.
What's next for IAG shares in FY26?
IAG provided FY26 guidance of "low-to-mid single digit" growth for the GWP.
The company forecasts a reported insurance profit of between $1.45 billion and $1.65 billion next year.
That would equate to a reported insurance margin of 14% to 16%.
IAG said its forecasts do not include the impact of its acquisitions of RACQ Insurance (RACQI) and RAC Insurance (RACI).
The insurer expects the RACQI acquisition to be completed on 1 September.
IAG reckons that acquisition alone would result in GWP growth rising to approximately 10%.
What does Macquarie make of all this?
Macquarie maintains its neutral rating on IAG shares.
After reviewing the FY25 numbers, the broker has shaved its 12-month share price target from $9.20 to $9.10.
The broker said:
The final dividend slightly missed VA consensus expectations as the company retains excess capital to complete the pending acquisition of RACWA.
Trading at only a ~3.8% premium to weighted peers on a 2-yr fwd PE basis, we see current valuation as fair and retain our Neutral rating.
