IAG Shares Make New High, As Bulls Eye Breakout

Amid the huge swings across the market this week, one name that has been quietly edging higher is IAG, with the shares making a new 52wk high at A$9 into the weekend, before closing at A$8.91 for a steady 1.25% gain on the week. IAG shares may have gone under the radar, but the move positions bulls for a run at a level that has been tough to crack in recent years.

After a difficult first few months of the year that saw the share price fall 20%, the rebound has since marked out the name as an outperformer on the ASX, up 14.23% over the past month, and 38% off the lows. Year-to-date, IAG is now up 11.51%, comparing favourably to the ASX 200’s own gain of 3.36%, or the ASX 200 Financials‘ 5.06%.

IAG Shares Building A Stronger Base

At its most recent Annual General Meeting, IAG management reaffirmed its FY27 financial targets, projecting gross written premium growth of between 5% and 8% year-over-year and a reported insurance margin in the range of 14.5% to 16.5%. The company also committed to keeping its expense ratio below 11%, a level of cost discipline that has impressed analysts watching the broader non-life insurance sector grapple with inflationary pressures on claims and repair costs.

In FY26, IAG reported underlying insurance profit of A$1.58 billion and a return on equity of 30%, a figure that comfortably doubles the company’s own 15% ROE target and signals a business operating well above its structural cost of capital. The dividend yield also sits at 3.6%, providing an income floor that has helped attract yield-seeking capital as the stock has climbed.

On the strategic front, the most closely watched development remains IAG’s proposed alliance with RAC Insurance in Western Australia. The Australian Competition and Consumer Commission initially opposed the arrangement on competition grounds, prompting IAG to lodge a formal Public Benefits Application.

The commercial logic behind the deal is straightforward, as if approved, the RAC alliance is expected to add approximately A$1.2 billion in annual gross written premium to IAG’s book and generate around A$100 million in pre-tax annual synergies once fully integrated, a mid-single-digit uplift to earnings per share that would meaningfully accelerate the group’s already strong capital generation profile.

Separately, IAG has drawn a line under one of its more complex legacy exposures.

The company finalised a settlement of the White Oak litigation, which stemmed from trade credit insurance claims connected to the 2021 collapse of Greensill Capital. The resolution eliminates a multi-year contingent liability that had introduced an element of uncertainty into the company’s capital planning. With that overhang cleared, markets can now focus more cleanly on IAG’s core underwriting operations and its capacity to sustain the elevated capital returns it has delivered in recent periods.

What Lay Ahead

Bulls will argue that IAG’s pricing power remains, with the company demonstrating a consistent ability to reprice home and motor insurance policies in response to rising claims costs without triggering material policy churn. That has been the primary driver of margin expansion and is the foundation on which the FY27 guidance rests.

Bears however point to IAG entering the Australian summer storm season, a period that historically tests the adequacy of natural hazard allowances and can introduce significant claims volatility. With the stock now trading at a price-to-earnings multiple ~20.8 there is limited room for earnings disappointment, and nature can be unpredictable.

From a technical standpoint, the test of A$9.00 and new 52-week highs is a positive development, although the RSI is approaching oversold at 64.56. There remains room to run technically if buyers are willing to step in, although Friday’s move was lighter than usual, with 4.21million shares, or 74% the usual average daily volume on the day. If A$9 is to be cleared and held, it will likely take significantly more enthusiasm from the bulls, and participation that suggests the trend is building. Quietly moving higher has worked well so far, but at pivotal areas of resistance, more may be required. Let’s see what the new week holds in store.