Some good news for shareholders at yesterday’s AGM of Insurance Australia Group (IAG): the company says it is on track to deliver on its full year financial guidance after an encouraging performance in the first quarter.
We should of course take that with a grain of salt because IAG has given us comments like this in last couple of years, only to change them as the company found itself beset by escalating claims from natural disasters here and in NZ.
The 2010-11 financial year is a case in point as two earthquakes in NZ, floods and cyclones in Australia and bad weather combined to make a mockery of the original guidance for the year.
But with the natural disasters and financial calamity provisos to one side, CEO Mike Wilkins told the insurer’s annual general meeting yesterday that gross written premium growth in the first few months of the financial year was encouraging, while natural peril activity has been benign.
However the company is adversely affected by volatile investment markets, he said, which is where the woes in Europe touches companies like IAG.
"We remain on track to deliver our full year guidance of an improved insurance margin of 10 to 12 per cent and gross written premium growth of six to nine per cent," Mr Wilkins told the meeting.
IAG said its 2012 financial year guidance assumes that, over the year, losses from natural perils are in line with budgeted allowances of $580 million; lower reserve releases of up to 2% of net earned premium; and no material movement in foreign exchange rates or investment markets.
Chairman Brian Schwartz told the meeting that he was confident that the Group is pursuing an appropriate corporate strategy which will increase shareholder value over the medium to long term.
"The Board and management team have worked closely during the year to agree a set of revised strategic priorities for the Group, which were announced in June 2011. Our emphasis is now on accelerating profitable growth in Australia and New Zealand, and expanding our footprint in Asia, while also restoring profitability in the UK as quickly as possible," Mr Schwartz said.
"We are confident that these reset strategic priorities will deliver further improvement in our top and bottom line performance, as demonstrated by the guidance we are reaffirming today for the 2012 financial year," he said.
IAG also said it was considering selling $NZ150 million ($A115.22 million) of unsecured subordinated bonds to the New Zealand public.
The proceeds would be used for general corporate purposes and to provide additional flexibility in managing future refinancing requirements, the company said.
It is expected the bonds would have a term to maturity of 25 years and be callable at IAG’s discretion on the fifth anniversary of their issue and on each interest payment date thereafter.
Interest would be payable quarterly in arrears.
More details of the offer are expected to be available in November.
The shares battled for some of the day yesterday after the early weakness.
They closed at $3.16, up 64c after touching a low for the day in early trading of $3.10.
