Investment Strategy
Insurance Australia Group: how fears could be overplayed
Thu 24th June, 2021

The insurance sector has been hit hard since early 2020, underperforming the market by almost 25%. A combination of stock and industry concerns, against a difficult claims environment, has weighed on equity prices. Two-thirds of major players in 2020 were forced to raise common equity capital in response.

In our view, Insurance Australia Group (IAG) (recently added to the Wilsons Australian Equity Focus List), the highest quality of the local insurers with a sector-leading return on capital profile, has seen its share price materially lag against the recovery of its peers.

Investor attention on IAG remains acutely focused on the potential for a $2bn claims problem emerging with Business Interruption (BI) insurance. Our work suggests that IAG may have overprovisioned for this issue, potentially by a factor over 2x.

While it will likely take several months to know for sure if our view holds, the potential for a material re-rating of the IAG share price remains. We see similarities between how IAG is being priced today and how the large banks were valued in the depths of COVID.

Disclaimer and disclosures

Recommendation structure, definitions and the Financial Services Guide (“FSG”) can be found at


This document has been prepared by Wilsons Advisory and Stockbroking Limited (AFSL 238375, ABN 68 010 529 665) (“Wilsons”) and its authors without consultation with any third parties, nor is Wilsons authorised to provide any information or make any representation or warranty on behalf of such parties. Any opinions contained in this document are subject to change and do not necessarily reflect the views of Wilsons. This document has not been prepared or reviewed by Wilsons' Research Department and does not constitute investment research. Wilsons makes no representation or warranty, express or implied, as to the accuracy or completeness of the information and opinions contained therein, and no reliance should be placed on this document in making any investment decision. Any projections contained in this communication are estimates only. Such projections are subject to market influences and contingent upon matters outside the control of Wilsons and therefore may not be realised in the future. Past performance is not an indication of future performance.

In preparing the information in this document Wilsons did not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Any advice contained in this document is general advice only. Before making any investment decision, you should consider your own investment needs and objectives and should seek financial advice. You should consider the Product Disclosure Statement or prospectus in deciding whether to acquire a product. The Product Disclosure Statement or Prospectus is available through your financial adviser.

Wilsons and Wilsons Corporate Finance Limited (ABN 65 057 547 323, AFSL 238 383) and their associates may have received and may continue to receive fees from any company or companies referred to in this document (the “Companies”) in relation to corporate advisory, underwriting or other professional investment services. The directors of Wilsons advise that at the date of this report they and their associates may have relevant interests in the securities of the Companies. Please see relevant Wilsons disclosures at

  • Share This Article

Written by

John Lockton, Australian Equities

John is a leading investment strategist with 20 years experience.

Related articles