IAG SHARES PLUNGE
Subdued earnings outlook and modest 1pc profit rise to A$947m hit firm
INSURANCE Australia Group Ltd (IAG) shares fell the most in over a decade yesterday after the insurer flagged a subdued earnings outlook and reported a modest rise in fullyear profit, driven by lower investment income.
Shares in IAG fell 8.5 per cent to A$7.77 (RM23.03), their steepest fall since 2007, even as the insurer announced a plan to return A$592 million in capital to shareholders via a special dividend.
Annual net profit from continuing operations rose one per cent to A$947 million, as insurance profit was partly offset by lower gains from investment, said the IAG.
Australia’s second-largest insurer by market value said it expected gross written premiums to rise by two to four per cent in fiscal 2019 and forecast insurance margins of 16 to 18 per cent.
Analysts said the guidance meant there was now a risk of the insurer not delivering earnings growth in coming years. But IAG said it was confident it would deliver on its modest guidance.
“The question: are we being too conservative in the way we’ve presented guidance or is there something else that’s worrying us?” said chief financial officer Nicholas Hawkins in a conference call with analysts.
Late last year, IAG announced it would share 12.5 per cent of its premiums and costs with Munich Re, Swiss Re and Hannover Re, in a series of deals designed to release capital and reduce risk.
“Increasingly, we’re trying to ensure that we have less unexpected outcomes than potentially in the past. And we’re pretty confident that we will deliver in that range,” said Hawkins.
IAG wrote A$11.65 billion worth of gross premiums during the business year, up about two per cent from fiscal 2017.