When markets get jittery, many investors flee to the sidelines. But not me. While short-term volatility can shake even seasoned hands, I see it as an opportunity—especially when it comes to Insurance Australia Group (ASX: IAG).

Despite the noise around rising reinsurance costs and natural disasters, I’m still buying IAG stock. Why? Because this company has the brand strength, financial discipline, and long-term strategy to not just survive—but thrive.

Let’s dive into what keeps me bullish on IAG even during turbulent times.

1. Insurance Is Cyclical—but Built to Last

The insurance industry moves in predictable cycles. When natural disasters hit, insurers face a wave of claims. But soon after, premiums rise, loss ratios improve, and margins recover.

We’ve seen this play out over the past few years. IAG faced a tough environment—intense floods, higher repair costs, and macro uncertainty. But through it all, it remained resilient, showing that its business model is designed to withstand shocks.

This resilience is why IAG remains a cornerstone of my long-term portfolio.

2. Strong Brand Portfolio = Pricing Power

IAG isn’t just another insurer—it owns some of the most trusted brands in Australia and New Zealand, including:

1. NRMA Insurance
2. CGU
3. SGIO & SGIC
4. WFI
5. AMI (NZ)

These are not just logos—they are trusted names built over decades. This level of brand recognition gives IAG a wide moat. It’s incredibly difficult for new players to break into the market when consumers automatically associate IAG brands with reliability and service.

And in insurance, trust is everything. That trust translates into customer retention and, importantly, pricing power.

3. Dividends That Deliver

In a volatile world, reliable dividends are gold. IAG has done well to continue rewarding shareholders even when the environment has been rough.

Latest dividend: $0.12 per share
Trailing twelve-month dividend yield: 3.43%

It’s not sky-high, but it’s sustainable and consistent—two traits that matter more than ever in a shaky macro climate. And with earnings improving, there’s scope for dividend growth in the next few years.

4. Strong Financials in FY25

The company’s performance in the first half of FY25 reinforces my optimism:

Revenue: $8.84 billion — up 9.56% YoY

Net Profit: $778 million — up a whopping 91% YoY

P/E Ratio: 17.17x — a fair valuation for a stable business

These numbers show IAG is not just surviving—it’s growing, and at a healthy pace.

5. Smart Reinsurance Strategy = Lower Risk

Yes, reinsurance costs are up globally, and this remains a key risk. But IAG has responded with strategic adjustments to its reinsurance program.

Key highlight:
Multi-year quota share agreements with Munich Re and others
These deals reduce exposure to catastrophic losses and help stabilise earnings.

This proactive risk management shows me that IAG’s leadership isn’t just reactive—they’re strategic, working ahead to build more predictable margins in an unpredictable world.

6. Digital Transformation Is Quietly Paying Off

While tech companies get all the digital headlines, IAG has been making meaningful progress behind the scenes. Through its “Customer Labs” and investment in AI-powered underwriting and claims automation, the company is:

1. Reducing operating costs
2. Speeding up claims processes
3. Improving customer satisfaction

This shift is slow and steady—but it’s creating operational leverage. As margins expand over time, so does the potential for earnings growth and dividend increases.

7. Still Below Pre-COVID Highs = Room to Grow

Despite its recent rally, IAG stock still trades below its pre-COVID peak. And that, in my view, creates an opportunity.

If the company continues to build on its FY25 momentum, improve risk control, and benefit from higher yields on its investment portfolio, capital appreciation is on the table—on top of the dividend income.

Outlook: Optimism with Caution

Let’s be real. IAG isn’t a growth rocket like a tech stock. It won’t double overnight. And yes, it faces short-term risks:

1. Higher claims from natural catastrophes
2. Reinsurance cost inflation
3. Ongoing market volatility

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