IAG shares jump on reinsurance cover
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More news: Shares in IAG jumped more than 7% to $7.14 in early trading on the ASX after the insurer said it had signed reinsurance deals with Berkshire Hathaway and Enstar Group.
IAG said the deals would protect its future financial stability against claims related to unpredictable extreme weather events. The insurer also confirmed full-year profit and margins were expected to be near the upper end of its guidance range.
IAG reaffirms guidance, negotiates reinsurance deals
The news: Insurer IAG has confirmed full-year profit guidance after negotiating agreements with global reinsurers to limit future costs.
The numbers: IAG confirmed it is on track for FY24 reported insurance profit to be near the upper end of the $1.2 billion to $1.45 billion guidance range, while its reported insurance margin is likely to be around the upper end of the 13.5% to 15.5% guidance range.
The company entered into a five-year natural perils reinsurance agreement with a unit of Berkshire Hathaway providing additional protection annually. This will effectively limit natural peril costs to $1.283 billion in FY25 and provides material downside protection for future earnings volatility against extreme weather events and weather patterns.
IAG has also purchased an adverse development cover (ADC) from a unit of Enstra Group, which provides $650 million of protection for long-tail reserves of approximately $2.5 billion as at 1 January 2024.
The context: IAG said the reinsurance covers would provide the company with a strong capital base to continue developing its business in Australia and New Zealand.
What they said: “Our long-term relationships with leading global reinsurers have allowed us to secure an innovative reinsurance arrangement that benefits our customers and shareholders," CEO Nick Hawkins said.
It will provide greater certainty over the cost of natural perils cover for our customers, stabilise our earnings and reduce our capital requirements."
The source: ASX announcement
