IAG reels from disasters

Big insurer expects rain to further damp profits

INSURANCE Australia Group says community concern over climate change is higher than ever before after natural disasters helped knock its first-half net profit down 43.4 per cent to $283 million.

IAG said natural peril claims, such as those from bushfire victims, cost it almost $100 million in excess of its allowance during the six months to December 31, while recent heavy rain in southeast Australia has prompted the company to again lower full-year margin guidance.

IAG now expects the figure to be to 12.5 per cent to 14.5 per cent, down from the already moderated figure of 14.5 per cent to 16.5 per cent it had stated last month.

The net natural peril claim cost for the full year is now forecast at $850 million, up from $715 million in January, factoring in the recent rain. The company’s first-half profit is also lower as the $200 million sale of its Thailand business last year has cycled out.

IAG shareholders will receive a reduced interim dividend of 10 cents per share, franked to 70 per cent – a drop from 12 cents per share a year ago. IAG chief executive Peter Harmer (left) said the summer’s natural disasters had triggered greater community concern than ever before over climate change and its impact.

He called for all levels of government to work with communities and businesses to minimise the immediate and long-term impacts of climate change. “From our own business perspective, estimating the impact of weather is not a perfect science, as there is a lot of variability from year to year,” Mr Harmer said. “We consider a number of factors when determining our natural perils allowance and this includes the number of customers and the types of policies they have, as well as external factors around past weather patterns and future trends.”

IAG expects the cost of the recent rain events to be capped at $135 million, in line with its second maximum event retention under its calendar 2020 reinsurance program.

The interim profit figure is also lower because of bushfire-related peril claims and the cycling out of its Thailand operations sale.

Gross written premiums increased 1.4 per cent over the period to $5.96 billion, while insurance profit lifted 1.0 per cent to $501 million.

A series of natural disasters, such as the bushfires, which killed 33 people, have plagued the country since last year.

Rival Suncorp on Tuesday reported a dip in statutory net profit following a similar surge in disaster claims.