Insurance Australia Group (ASX:IAG)
has increased its expectation for financial year 2022 net natural perils claim costs, after severe storm and hail activity experienced over October.
With the most recent event, which impacted South Australia, Victoria and South-East Queensland last week, IAG had received approximately 14,000 claims by 4pm yesterday (November 1), and this number is expected to rise further over coming days.
The net cost for this event is anticipated to be $169 million, the maximum retention for a first loss under IAG’s catastrophe program, according to the company.
“Our priority is to help affected customers across our NRMA Insurance, SGIC, CGU and WFI brands as soon as possible,” said CEO Nick Hawkins.
“Our major event team is in place all year round to respond to severe weather events like this and we have allocated extra resources to support our customers impacted by the recent weather events."
Despite IAG raising the natural perils allowance significantly from FY21 to FY22, IAG said the claims experienced have been seasonally unexpected and have exceeded the assumptions underpinning the increase.
Following the South Australian hail and Victorian wind event, and other events that impacted the second half of October, IAG increased its expectation for FY22 net natural perils claim costs to $1,045 million, compared to the previous assumption of $765 million.
The $280 million increase in net natural perils claim costs equates to approximately 360 basis points at the reported insurance margin level. As a result, IAG has lowered its FY22 reported insurance margin guidance range from 13.5-15.5 per cent to 10-12 per cent. Other assumptions remain unchanged.
“We remain confident in IAG’s operational momentum in FY22, after the strong start in the first quarter that we reported at the recent AGM.”
Shares in Insurance Australia Group (ASX:IAG)
are trading 6.9 per cent lower at $4.50.