Why is the IAG (ASX:IAG) share price diving in December?

a person holds their head in their hands as they slump forward over a laptop computer which features a thick red downward arrow zigzagging downwards across the screen.

The Insurance Australia Group Ltd (ASX: IAG) share price has moved in circles during the month of December. This comes despite the company providing investors with a positive business update three weeks earlier.

At yesterday’s market close, the insurance giant’s shares recovered some of its losses by rising 1.41% to $4.33 a pop.

What’s got IAG in a tailspin this month?

While management reported its revised targets on margin and gross written premium (GWP) growth, IAG shares pushed higher.

The company is forecasting low single-digit increases on GWP and an insurance margin guidance range of between 10% to 12%. Previously, the insurance margin level was in the 13.5% to 15.5% range.

The seasonally unexpected claims made year to date forced IAG to downgrade its FY22 GWP and insurance margin guidance.

The company revealed that it is expecting a significant rise in net natural perils claim costs for FY22. Severe storm and hail activity experienced in South Australia and Victoria during October were being blamed for the increased costs.

In total, net natural perils claim costs for the current financial is forecasted to be around $1,045 million. This is a hefty amount from the company’s previous estimates of $765 million. It is worth noting that this includes $510 million for perils events for the remainder of the financial year.

What do the brokers think?

A number of brokers have rated the company with comparable price points since the release of its business update on 7 December.

Leading Australian investment firm, Macquarie cut its 12-month price target by 3.7% to $5.20 for IAG shares. Following suit, Swiss investment bank, UBS had a more bearish stance, reducing its rating by 21% to $4.20.

It appears investors are more in tune with UBS’ outlook on the IAG share price

IAG share price review

Over the last 12 months, the IAG share price has lost around 10%, with year-to-date down 8%. It’s worth noting however that the company’s shares have lost 50% since July 2019, particularly when COVID-19spread across Australia.

Based on today’s price, IAG presides a market capitalisation of roughly $10.67 billion, with approximately 2.47 billion shares on issue.

The post Why is the IAG (ASX:IAG) share price diving in December? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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