IAG’s Shares Plunged On ASX After Providing An Update On Net Natural Peril Claim Costs Following Sydney Hailstorm

  • Dec 21, 2018 AEDT
  • Team Kalkine
IAG’s Shares Plunged On ASX After Providing An Update On Net Natural Peril Claim Costs Following Sydney Hailstorm

On 21 December 2018, Insurance Australia Group Limited (ASX: IAG) provided an update on net natural peril claim costs for the financial year-to-date (FY19), following a severe storm which impacted the Sydney region yesterday (i.e., 20 December 2018). Following the announcement, the share price of the company decreased by 4.317 percent as on 21 December 2018.

As per the release, the anticipated pretax cost of the Sydney storms is in line with the maximum first event retention of $169 million post-quota share. The company has already received over 6,500 claims resulting from the Sydney hailstorm which are mostly related to motor and property damage. The number of claims is expected to rise significantly in the upcoming days.

As per IAG’s Australia Division CEO Mark Milliner, the company’s priority is to help customers who are affected by the hailstorm as early as possible. The company has allocated extra employees to the claims and repair management teams. Further, the company’s online claim lodgment facility is assisting the rapid assessment of claims. Very soon, the company will set up its specialist hail repair units across Sydney to assist in assessing and repairing of hail-damaged vehicles.

The company has advised its customers to contact the company as early as possible, if they want to file a claim, access emergency accommodation or request technical property assistance with a verified building specialist. The company is estimating that its year-to-date net natural peril claim costs for FY19 are around $410-430 million pre-tax, post-quota share. The estimated claim cost includes $150mn for events incurred in the five months ending 30 November 2018, about $70 million from the southern low which affected parts of New South Wales, Victoria, and Queensland in mid-December. The estimated cost also includes $169mn attributable to the latest Sydney storms and $20mn -40mn of attritional events incurred so far in December.

As per the company’s current expectation, the deductible attached to the 2018 aggregate cover has been fully eroded, which is why the cost of any succeeding event in the period up to 31 December 2018 will be capped at $17mn pre-tax, after allowing for protection provided by the aggregate cover.

The company is expecting that its maximum event retention from 1 January 2019 will be similar to the $169mn applicable from the beginning of calendar 2018.  The company’s catastrophe reinsurance for FY 2019 is further strengthened by the stop-loss cover which has provided $101mn of protection directly above IAG’s FY 2019 natural perils allowance of $608 million.

In the last six months, the share price of the company decreased by 16.78 percent as on 20 December 2018 and trading at a PE multiple of 17.410x. IAG’s shares traded at $6.650 with a market capitalization of circa $16.06 billion as on 21 December 2018 (AEST 4:00 pm).


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