IAG has approached its 52 week lows justifiably again! I've topped up again. Partly, in anticipation of the rate rise decision tomorrow. That will be a tailwind for insurers in general.
Inflationary environments are generally good for insurance companies, especially ones with pricing power like IAG. The last few years have been bad for IAG with many headwinds and governance issues that have lead to increased costs (e.g. business interruption insurance claims and associated legal costs). I feel that it's upwards from here.
With rising interest rates expected, many investment commentators feel insurance is a defensive option. The main reason is that interest earnings on their premiums float (premiums collected from the insured) will rise; some expect a 1% rise in rates will increase IAG's earnings by up to 20%.
I also trust Warren Buffet who has recently added materially to his insurance exposure through another big acquisition in Alleghamy. His company already owns big insurers. So that's saying something about he's feeling about insurers holding up in an inflationary world.
Further, with the business interruption cases progressive coming to a close (pending some further court appeals) with insurers winning most of the issues in question, there is expected progressive release from the provisions, and that will likely be returned to patiently shareholders in some form (even $0.5b would be a great return to shareholders).
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