IAG's Premium Growth Slowdown Meets a Value Case Against the Banks

Slowing gross premium growth, rising motor insurance competition and weather claims hit the stock, but fund managers see better value here than in the banking sector.

5 Oct 2026 · 2 min read

Insurance Australia Group fell more than 15 percent from its September highs after a complex first-half result, complicated by the RACQ Insurance acquisition, revealed slowing gross written premium growth, increasing motor insurance competition and higher than expected weather-related claims costs, before fund managers argued the quality of its market position and improving cycle would drive a recovery.

Cycle fears emerge on slowing premium growth

Pendal Group said the stock fell 11.1 percent after first-half net profit beat by 9 percent, though driven by investment income rather than insurance profit, which came in line with expectations with some concern on quality, as gross premium growth slowed to 2 percent excluding RACQ, playing into cycle fears, with the insurance margin only meeting consensus with help from reserve releases and profit commissions needed to offset underlying deterioration. Yarra Capital Management, overweight, said the general insurer underperformed following first-half results that were more complex than usual due to the RACQ Insurance acquisition, highlighting modest gross written premium growth and increasing competitive intensity in motor insurance, while still viewing IAG as a quality business with commanding market positions. Sage Capital said its long position was relatively weak, down 12 percent, as the insurance industry was hit by higher than expected claims costs from severe weather events and a softening in premium price growth.

Insurance profit was in line with expectations, although there was some concern on quality. Growth in gross premiums slowed to 2% (excluding RACQ), playing into cycle fears. The insurance margin only met consensus with the help of reserve releases and profit commissions.

— Pendal Group, Newsletter, February 2026

A preferred insurance sector exposure

Blackwattle Investment Partners said its preference in the financials sector is insurance stocks, holding an overweight position in IAG alongside QBE and Suncorp.

A quality business at attractive value versus banks

Airlie Funds Management rated the stock a buy, describing IAG as Australia and New Zealand's largest personal lines insurer with a disciplined market and strong share, seeing solid returns even allowing for some share erosion, trading on around 17 times earnings with a 4.5 percent yield, better value than the banks.

As Australia and New Zealand's largest personal lines insurer with a disciplined market and strong share, sees solid returns even allowing for some share erosion, trading on about 17x earnings with a 4.5% yield — better value than the banks.

— Airlie Funds Management, Article, September 2026

What fund managers say they are watching next is whether gross written premium growth reaccelerates as competitive intensity in motor insurance eases, resolution of weather-related claims cost pressure, continued smooth integration of RACQ Insurance, and whether the stock's valuation versus banks continues attracting relative value buyers.