Insurance Australia Group Ltd (ASX: IAG) shares are 0.41% higher in early-afternoon trade on Tuesday. The uptick means the shares have jumped around 12% over the past week, to $7.28 a piece.
IAG shares are now 9.01% lower for the year-to-date and 3.2% lower than 12 months ago.
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What has happened to IAG shares so far in 2026?
IAG shares have been volatile over the past 12 months, fluctuating between $6.39 and $9.18 per share.
Most recently, the shares crashed nearly 18% last month.
There was no price-sensitive news out of the company at the time, so it's possible the share price decline started with investors taking gains off the table ahead of the company's first-half FY26 results mid-month.
The company's half-year FY26 results showed a significant drop in profit. For the six months to 31st December 2025, IAG's revenue was up 23.3%, but its net profit after tax dropped 35.1%.
Despite the decline, IAG maintains its FY26 profit guidance of between $1,550 million and $1,750 million. But investor sentiment had already been dented, and the share price continued tumbling to a two-year low of $6.44 in early March.
At the same time, extreme country-wide weather conditions such as bushfires and widespread flooding have created headwinds for the insurance business.
Many have raised concerns about the number of insurance claims and reinsurance costs. And investors are apprehensive about what this might mean for the business.
There isn't any more price-sensitive news out of IAG to explain the latest turnaround. But analysts reiterated their buy ratings on the stock following the results announcement last month, flagging that the shares are now undervalued and oversold. Perhaps investor sentiment is finally following suit?
And there could be a lot more to come…
Earlier this year, IAG successfully integrated its RACQ Insurance (RACQI) business into its main catastrophe cover and expanded its WAQS arrangements to cover 35% of the consolidated business.
The company has maintained RACQI's separate, standalone reinsurance program, which includes quota share and catastrophe protections.
For 2026, IAG's total catastrophe reinsurance program provides main catastrophe cover for two events up to $10 billion, with an attachment point at $500 million.
And analysts expect that the combined impact of recent catastrophes and broader claims inflation will influence upcoming renewals as insurers manage loss ratios and capital requirements.
This means that if weather conditions normalise or decline, earnings could rebound quickly, potentially leading to higher dividends, a share buyback, and increased investor confidence in IAG shares.
TradingView data shows analysts are very bullish on IAG shares. Out of 11 analysts, 7 have a buy or strong buy rating. The maximum target price is $9.80, which implies a 36.36% upside at the time of writing.
