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IAG share price: where next following key insurance update?

IAG has today provided shareholders with an update concerning its CY20 catastrophic reinsurance program as well as its perils claims costs.

IAG share price Source: Bloomberg

IAG share price: reinsurance program update

The ASX 200 traded firmly higher today: up 88 points or 1.36% a little after noon. All sectors were in the green, following a positive lead from Wall Street overnight.

The insurance giant Insurance Australia Group (ASX: IAG) – detailing its finalised catastrophic reinsurance for CY20 as well as providing the market with a ‘perils update’ – also rose.

Specifically, IAG noted that it had today finalised its catastrophe reinsurance program for CY20 – increasing its gross reinsurance protection from $9bn in CY19 to $10bn in CY20.

Commenting on the nature of the reinsurance program – which represents a vital part of the firm's capital platform – IAG's CFO, Nick Hawkins, said:

'While the structure of the 2020 program is similar to prior years we continue to expand our catastrophe reinsurance cover in a cost-effective manner, while providing additional protection above our modelled exposure.'

IAG further noted that it had increased its multi-year arrangements which the firm has with some of its largest reinsurance counterparties.

Perils claims costs in focus

Reflecting on the deeply tragic bushfire catastrophe currently sweeping through Australia, IAG additionally provided an update on its net natural perils claim costs for the current financial year.

Underscoring the severity of the bushfires, IAG commented that it had already received over 2,800 bushfire-related claims since September 2019, of which a majority (1,500) of these claims, have occurred since December alone.

'Our priority is to help customers affected by these terrible events as soon as possible, while minimising the personal risk to those facing these ongoing catastrophes.'

'Our claims teams are identifying and calling those customers potentially impacted when appropriate, while our dedicated major event claims teams are contacting customers as soon as claims are lodged,’ IAG further said.

Though the company noted that it is too early to provide precise estimates, the company anticipates that claims costs for the first-half of FY20 will hit ~400m (post-quota share).

Maybe most worryingly however, was IAG pointing out that conditions were anticipated to worsen for bushfire impacted regions this coming weekend.

The Morrison Government has been heavily criticised for their response to the continuing bushfire crisis.

IAG is set to report its first-half FY20 results in a little over a month, on February 12.

At current price levels of $7.60 per share, the IAG share price currently trades approximately 8% higher than it did a year ago.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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