Australian insurer IAG sees margin drop on rising costs from floods – Reuters.com

July 22 (Reuters) – Insurance Australia Group (IAG.AX) said on Friday its annual insurance margin could dip below its forecast as natural peril costs continue to grow due to severe storms and flooding in the country, sending its shares 2% lower in early trade.
Australia's top general insurer said annual natural peril costs were in line with forecast at A$1.12 billion ($774.70 million), resulting in likely reported insurance profit of A$586 million, much lower than last year's A$1.01 billion. (https://bit.ly/3zr0Eic)
That represents an annual insurance margin of 7.4%, way below its guided range of 10%-12% reaffirmed in March.
Australia has been reeling with natural disasters from the beginning of the year, with a national emergency being announced in March after its east coast was battered by severe floods that caused evacuations, power outages, and school closures.
"We have been impacted by claims inflation in our key home and motor portfolios and have significantly increased our natural perils allowance to help ensure the business can withstand the impact of increasing frequency and severity of natural perils," Chief Executive Officer Nick Hawkins said.
Still, the insurer expects to swing back to a profit and report an annual net profit after tax of A$347 million, compared to A$427 million loss last year. It also sees strong momentum from 2023, with an insurance margin guidance of 14%-16%.
Analysts with Citigroup said in a note that the market is likely to be unimpressed by another disappointment and in the company's ability to guide about its performance.
($1 = 1.4457 Australian dollars)
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