Insurance Australia Group (IAG) has warned claims relating to last week’s storms that struck eastern Australia will sharply lift its costs for the financial year and weigh on its insurance margin for the year to June.
The warning raises the possibility IAG could report a profit for 2014-15 lower than estimates from analysts.
The insurer is facing up to $300 million in claims from the storms – $250 million from the so-called super storm last Monday through Thursday, and a further $50 million from last Saturday’s hail storm which swept across Sydney late in the afternoon and early evening.
IAG, one of the country’s biggest general insurers, said on Wednesday it has received almost 30,000 claims so far for storm damage in Sydney and the rest of NSW.
It estimated the $300 million cost for wind and flooding damages, as well as the hail storm will be on top of the $A140 million in costs related to damages caused by tropical cyclone Marcia when it hit Queensland in February.
As well IAG had a cost of $165 million from claims associated with the Brisbane hailstorms in November.
IAG 1Y – Sydney storms see IAG lower guidance
With two months to go until the end of the fiscal year, IAG said it has lifted its assumption for natural-disaster-claim costs to $A1 billion, including its reinsurance coverage, from its earlier assumption of A$700 million.
Based on that cost, the insurer said its insurance margin for the year is likely to be between 10.5% and 12.5%, down from previous guidance of 13.5% -15.5%.
However, IAG stuck with a February forecast for gross written premium growth of 17% -20% for the fiscal year.
But with two months to go, the lower insurance margin is pointing to a lower profit for the full year to June 30.
Interim profit after tax fell by just on 10% to $579 million, thanks in part to the costs associated with the Brisbane hail storm.
“Managing events like those we have seen in the past few months is part of our normal business activity but their incidence and size are unpredictable,” IAG CEO Mike Wilkins said in yesterday’s statement.
Rival Suncorp which last week said it had received about 7,500 claims related to the NSW storms, has yet to quantify the cost.
But it is also wearing huge insurance costs from cyclone Macia in February and those big Brisbane hailstorms.
Suncorp said in its interim report in February that that storm cost it $250 million.
IAG’s shares slumped as much as 5.6% in early trading, and ended the day down 4%, at $5.65. Suncorp shares lost 2.6% and ended at $13.16.
