IAG’s profit margin falls as nat cats take tollJanuary 27 2020 by Yvonne Lau
Australian giant IAG has announced an expected earnings hit — the insurer revised its profit margin for the financial year to between 14.5% and 16.5%, a decline from original estimates of between 16% and 18%.
The announcement comes before the release of the group’s half-year results in February 2020. Its share price fell by around 5% to A$7.30 following the news.
Australia’s recent slew of natural catastrophes contributed to the profit revision — which includes last week’s hailstorms that has already brought IAG 28,000 claims at a cost of A$169 million (US$115 million). The country’s ongoing bushfires has cost the insurer around A$160 million (US$109.3 million); the figures are expected to keep rising.
Peter Harmer, IAG’s chief executive and managing director, commented: “We have revised our reported insurance margin guidance for the full year to reflect the recent heavy natural peril activity and a reduced expectation for prior period reserve releases following the lower than anticipated first-half net reserve release outcome.”
Total natural catastrophe losses for IAG’s first half of the 2020 financial year has reached A$400 million (US$273 million) — meaning the insurer will likely exceed its disaster allowance for the second consecutive year.
IAG recently finalised their catastrophe reinsurance programme for 2020, increasing its reinsurance protection to A$10 billion (US$6.94 billion) — an A$1 billion (US$682.5 million) increase from 2019.
Other national insurers such as Suncorp and QBE have also been impacted by costly catastrophe losses in recent years. Earlier this month, Suncorp recorded 2,600 bushfire claims at a cost of A$345 million (US$237 million) — and has already exceeded its first half nat cat allowance.
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