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Highlights
- IAG's share price hits $8.30: The stock has surged over 40% in 2024, surpassing the S&P/ASX 200 Index's 9% increase.
- Strong financials in FY24: IAG posted an 11% rise in net earned premiums, strong profits, and an 80% increase in its dividend payout.
- Broker forecasts mixed: UBS projects a 21% rise in net profit, but cautions that IAG’s share price may be overvalued at current levels, setting a target price of $7.10.
The Insurance Australia Group Ltd (ASX:IAG) has experienced significant growth in 2024, with its share price reaching a new five-year high of $8.30 in early trading today. Despite a slight pullback later in the day, IAG's performance this year continues to stand out, having surged more than 40%, significantly outperforming the broader market.
IAG, a leading insurance group in Australia, is behind well-known brands like NRMA Insurance, CGU, and State. The company’s strong performance can be attributed to favorable operating conditions, as reflected in its most recent financial updates.
For the full fiscal year 2024, IAG saw a significant boost in its net earned premiums, increasing by 11% to $9.2 billion. This was accompanied by an improvement in the company's underlying insurance margin, resulting in a pre-tax insurance profit of $1.4 billion and a net profit of $898 million. Furthermore, IAG's investment income from shareholders' funds also rose, adding to the positive momentum.
The strong earnings allowed IAG to reward its shareholders with an 80% increase in its annual dividend per share, now at 27 cents. In addition, the company announced an on-market share buyback program, with a further $350 million allocated to the initiative, in addition to a previous buyback of $550 million.
Looking ahead, IAG has outlined ambitious targets for its future performance. The company aims to achieve an insurance margin between 13.5% and 15.5% for fiscal year 2025, with gross written premium (GWP) growth projected in the mid-to-high single digits. These targets assume natural perils will be approximately 18% higher than last year’s allowance, though the company has reported relatively low natural peril activity in the first quarter.
While IAG’s outlook remains positive, the future trajectory of its share price is less certain. UBS, a prominent broker, has forecasted a 21% increase in IAG’s net profit, bringing it to $1.09 billion. However, despite this optimistic outlook, UBS also highlighted that the current share price, which is trading at 19 times FY25’s estimated earnings, may be priced too high. As a result, UBS has set a neutral rating on IAG with a price target of $7.10, suggesting a potential decline of 13% over the next year.
