Insurance Australia Group Up 4.5% Outlook

Insurance Australia Group Up 4.5% Outlook

Why are its shares higher?

This morning Insurance Australia advised that it has completed its preliminary review of prior period reserve releases for the financial year ended 30 June 2017. Pleasingly, the review indicates an outcome equivalent to at least 5% of net earned premium (NEP). Previous guidance provided by the insurer was for at least 2% of NEP According to the announcement, the reserve release relates primarily to its Australian long tail classes. These comprise CTP, liability, professional risks, and workers’ compensation. Management advised that the higher indicated outcome reflects its favourable experience against underlying assumptions for claim size and inflation.

What does this mean for its results?

In light of this expected increase in its reserve releases, Insurance Australia has increased its margin guidance range for FY 2017 from between 10.5% and 12.5%, to 13.5% and 15.5%. This guidance also takes into account net losses from natural perils of $850 million and a small net negative from its optimisation program initiatives.

Technical Analysis

Overall, the bias in prices is: Upwards.

Short term: Prices are moving.

Intermediate term: Prices are trending.

The projected upper bound is: 7.00.

The projected lower bound is: 6.46.

The projected closing price is: 6.73.


A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 6 black candles for a net of 3 black candles. During the past 50 bars, there have been 24 white candles and 23 black candles for a net of 1 white candles.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 44.1176. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 51.30. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 19 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -46. This is not a topping or bottoming area. The last signal was a buy 1 period(s) ago.


The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 9 period(s) ago.

Rex Takasugi – TD Profile

INSURANCE AUSTRA closed up 0.030 at 6.720. Volume was 6% below average (neutral) and Bollinger Bands were 16% narrower than normal.

Open   High    Low    Close   Volume
6.730   6.780  6.710  6.720   5,272,383

Technical Outlook
Short Term:               Neutral
Intermediate Term: Bearish
Long Term:               Bullish

Moving Averages: 10-period    50-period    200-period
Close:                       6.76              6.55              6.06
Volatility:                21                  26                 22
Volume:                  4,616,158     5,573,265    5,713,990

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.


INSURANCE AUSTRA is currently 11.0% above its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of IAG.AX at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on IAG.AX and have had this outlook for the last 1 periods.

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Ivy Heffernan

Ivy Heffernan, student of Economics at Buckingham University. Junior Analyst at HeffX and experienced marketing director.

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