March storms push IAG into reinsurance – profit forecast cut
Insurance Australia Group (IAG) has received in excess of 24,000 claims following severe weather in Victoria on 6-9 March with costs hitting its maximum event retention (MER) of $135m under AIG’s reinsurance cover.
Natural peril costs are now estimated to exceed the budgeted $184m allowance for the second half by $105m. AIG cut its expected full year insurance margin guidance to 10.5% - 12.0%, from 11.5% - 13.0%.
Managing director and CEO, Michael Wilkins, said: “Our businesses, which distribute insurance predominantly under the RACV1 and CGU brands in Victoria, continue to work around the clock to assist customers as quickly as possible. I am very proud of the response of our teams to date.
Reinsurance kicks in
“We now believe the scale of this event means we will make claims on our catastrophe reinsurance covers, which will cap the group’s total pre-tax loss at $135m. The Group’s MER for any subsequent event in calendar year 2010 now reduces to $75m.
"While this event will take almost 2% off our reported full year margin, for FY10 we are confident we can achieve an insurance margin between 10.5% - 12.0% given the continued improvement in the underlying performance of the business."