Insurance Australia Group Ltd (ASX: IAG) this week reported a solid but unremarkable increase in underlying earnings, but the question is, where to from here for IAG shares?
We've canvassed the views of two brokers, and it's fair to say they are broadly positive.
But first, let's look at the results.
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Solid underlying performance
IAG reported an underlying insurance profit of $804 million, up 7.6% on the previous corresponding period, on $8.93 billion in premiums written, up 6%.
The company declared a steady dividend of 12 cents per share and also announced an on-market share buyback worth up to $200 million.
IAG Managing Director Nick Hawkins said the result demonstrated the strength of the business.
He went on to say:
Today's results show the work we've done to deliver a more stable earnings profile, maintain a strong underlying margin, and ensure Australia and New Zealand are well protected through our comprehensive reinsurance program which now includes RACQI. Various major hailstorms and severe weather events in October and November across south-east Queensland and northern NSW resulted in significant claims for insurers , including more than 35,000 for IAG as customers were supported through adversity. The severe weather was an opportunity to demonstrate the strength of IAG's customer support. Our response was faster and even more targeted as a result of our new, proprietary Situation Awareness Map, powered by AI, data, and satellite technology.
On the outlook, IAG slightly downgraded its forecast for full-year gross written premiums (GWP) to high single digits, down from 10% previously, and maintained its FY26 insurance profit guidance range of $1.55 to $1.75 billion.
Shares looking cheap
The analysts at Morgan Stanley looked at the results and said there could be some upside, with "some potential in the near-term for higher pricing to emerge or investment yields to rise or extra reinsurance deals to unlock capital, though these are not in our base case''.
They also added that insurance companies wouldn't be immune from fears around artificial intelligence.
As they wrote:
Given recent market debate about increasing competition from AI-powered price discovery in personal lines, we think the lower topline growth will be a point of concern for investors.
Morgan Stanley has a price target of $7.50 on IAG shares against the current price of $6.89.
Macquarie is more bullish on the stock with a price target of $9.
It said:
At current valuations we believe the stock is cheap, with earnings (and dividends) quarantined in 2H26 and reinsurance costs protected for the next three years.
