Shareholders in the country's biggest general insurer, Insurance Australia Group, who might have been looking for more positive news from the lumbering giant at yesterday's AGM would have been disappointed.
All they got about the 2008 outlook was a re-statement, unchanged from the outlook published last month.
IAG's guidance for FY08 (which was revised in October 2007) is to:
• Deliver gross written premium growth of 7 – 9%
• Achieve an insurance margin of 11 – 13%
• Retain our strong capital position and very strong ‘AA' ratings for key wholly-owned insurers
• Deliver a dividend of 29.5 cents per share
(This was subject to no catastrophes or large losses outside IAG's allowance nor any material movements in currency or credit spreads).
So in yesterday's market when banks and financial stocks rallied strong on bargain hunting (especially among the banks), IAG shares went backwards, drifting a couple of cents lower to $4.32.
Small shareholders though had some justifiable moans about the company's poor recent performance and falling earnings.
The outlook in yesterday's speech by CEO Michael Hawker didn't attempt to flesh out or provide any further detail of last month' downgrade of its revenue growth forecast from between 10% and 12% because of tougher competition in the Australian and British markets.
"With regard to our forecast for the rest of this financial year, we expect gross written premium income will grow in the range of seven to nine per cent for the year, the insurance margin between 11 to 13 per cent, that we will retain our strong capital discipline, and maintain our dividend at 29.5 cents per share fully franked," Mr Hawker told the AGM.
He said the company would also hold back on acquisitions "until the benefits of expanding into the UK are realised".
IAG's 2007 earnings fell 27% to $552 million (from 2006's $759 million) on the back of higher storm claims in Britain and Australia (mainly NSW in June), lower investment earnings and soft markets.
Mr Hawker told shareholders the company was facing problems in the UK market after it spent almost $2 billion there on acquisitions in fiscal 2007.
Mr Hawker said the acquisitions had "some operational issues" which had prevented them meeting the expected hurdle rate of returns.
Shareholders were told IAG was dealing with two negative cycles – one in the Australian commercial insurance and the other in the UK private motor insurance market.
"However, we have taken decisive action to manage the short term issues and position ourselves for the return to more favourable conditions as the cycles turn, as they inevitably do," Mr Hawker said.
"We are also dealing with increased frequency of weather events above our expected norms over the past two years."
IAG incurred more than $500 million in gross claims costs from storm damage in Australia and the UK in 2007.
The impact, net of reinsurance, was $200 million.
