The Insurance Australia Group Ltd (ASX: IAG) share price is trading in the red at lunchtime trading on Tuesday. At the time of writing, IAG shares are 1.86% lower and changing hands at $8.185 a piece.
The S&P/ASX 200 Index (ASX: XJO) insurance giant's share price has slowly fallen over the past month, down 5.59% so far. And for the year it is 8.34% higher.
There is no news out of the dividend-paying insurance company this week, but Macquarie Group Ltd (ASX: MQG) released a note to investors today updating its stance on IAG shares.
The broker has confirmed its neutral rating and $9.10 target price on IAG shares. At the time of writing, this represents a potential 11.2% upside for investors over the next 12 months.
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Macquarie's take on Australia's insurance market
In Macquarie's latest Australian General Insurance report, the broker explained that it executes a proprietary online "price-scraping analysis" for home insurance, incorporating over 1,000 price points by state and brand, weighted to reflect the mix of each business.
The broker said that for the September 2025 quarter, there were overall price rises of +10.3% versus the prior period. IAG's average repricing for new Home policies was ~190bps higher than Suncorp's in the last quarter (IAG was +4.6% versus SUN which was +2.7%).
"In the absence of catastrophes, we expect strong competition to continue for new business in the direct channel for Home and Personal Motor," Macquarie analysts said.
The analysis also covers commercial pricing data for the SME segment. Given underwriting agencies hold a smaller share of Steadfast's proprietary platform (SCTP), Macquarie anticipates pricing there could be higher than its data set.
Over the September quarterly, average premium SME rates for new and renewal businesses rose +6.9% versus the prior period.
"We expect Commercial Lines pricing to deteriorate further over the next 6+ months as broad based competition remains and new insurers hunting for growth (just after the top of the premium rate cycle) look to build their books, particularly for Middle Market and Corporate accounts," Macquarie said.
Meanwhile, the broker's analysis of CTP insurance shows a +6.7% average premium rate increase in the September quarter. This was the primary contributor to IAG's higher average repricing.
But the broker also pointed out that the premium insurance rate cycle peaked in the June 2023 quarter.
"As the tail end of peak repricing contributes to margins, this may represent as good as it gets for insurers, prompting us to proceed with caution," the broker said in its investor note.
