IAG hit as personal injury claims jump
Insurance Australia Group Limited (IAG) this morning said it would take a one-off, pre-tax charge of around $365 million, with a full-year insurance margin of 6% to 7%, down from 9.5% to 11%. IAG said the writedowns were ‘due to a significant deterioration in UK claim experience, in particular bodily injury claims.’
Looking further down the track the insurer said next year’s FY11 insurance margin guidance would be around 10.5% to 12.5% as business conditions improve.
Managing director and CEO, Michael Wilkins, said the increasing cost of personal injury claims had been noticed as far back as 2007, however actuaries only recently uncovered the full extent of the effect of the claims.
“Our immediate priorities have been to ensure our UK business is appropriately reserved, our exposure to this issue is limited through reinsurance, and that we have an appropriate programme of remedial actions,” Mr Wilkins said.
Mr Wilkins expressed disappointment that injury claims would wipe 5% off its insurance margins.
”Encouragingly, all other businesses within the Group are performing at least to expectations,” Mr Wilkins said.
“Following our strategic reset in July 2008 the underlying performance of our business has steadily improved and we remain confident this will continue into FY11.”
The company noted that guidance was based on claims from natural disasters not exceeding a budgeted $435 million.
At the close Tuesday, IAG shares were trading at $3.61.
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