IAG joins forces with reinsurers to bolster capital

Company News

by Jessica Amir

General insurance company, IAG (ASX:IAG) inked agreements with three reinsurers to quota share a combined 12.5 per cent of its consolidated business as of 1 January 2018, which will reduce its earnings volatility and improve its capital efficiency.

As a result, the three reinsurers (for an average term of over five years) will receive a total of 12.5 per cent of IAG’s consolidated gross earned premium and respectively pay IAG 12.5 per cent of claims and expenses.

IAG will also receive exchange commissions from the other parties (Munich Re, Swiss Re and Hannover RE) for having access to the insurer’s franchise.

IAG bumped up its insurance guidance margin for this financial year by 125 basis points (to 13.75 per cent to 15.75 per cent). 

IAG shares are trading about 1.3 per cent higher to $7.23.

Jessica Amir

Finance News Network
Jessica is a senior finance journalist and presents the Market Outlook, Market at Midday and Market Wrap. She also presents ASX company news and interviews CEOs. She joined FNN in January 2017 with six years of broadcast journalism experience. She worked as a journalist and producer with Sky News Business, ABC 1, ABC's The Business and ABC24. She also worked in regional Australia for Prime 7 and WIN News as a TV reporter. In her prior life she worked as a financial planner.