Hail Storm Damage

INSURANCE giant IAG has trimmed its full-year earnings guidance as a result of last week’s savage storm in Victoria.

Hailstones piled up on a Melbourne street after a storm on March 6, 2010. (Audience submitted: Peter Risbey)

IAG said it now expected an insurance margin for the year to June 30 of between 10.5 and 12 per cent, down from its previous forecast of 11.5 to 13 per cent.

Australia’s largest general insurer said it had received more than 36,000 claims from the storm, which lashed houses, cars and businesses in Victoria with hail and torrential rain last Saturday and Sunday.

IAG said the cost of the claims would cgjackets.ca
exceed its $135 million limit before reinsurance cover kicked in.

“We now believe the scale of this event means we will make claims on our catastrophe reinsurance covers, which will cap the group’s total pre-tax loss at $135m,” IAG chief executive Michael Wilkins said yesterday.

“The group’s maximum event retention (highest possible loss) for any subsequent event in calendar year 2010 now reduces to $75m.

“While this event will take almost 2 per cent off our reported full-year margin for the 2010 financial year, we are confident we can achieve an insurance margin between 10.5 per cent and 12 per cent given the continued improvement in the underlying performance of the business.”

IAG — which operates in Victoria mostly through the RACV and CGU insurance brands — said its natural peril costs would exceed the budgeted $184m by $105m in the second half.

The company’s shares closed up 1c at $3.96 while the broader market was almost unchanged.

Insurers were still reeling from the Queensland floods when the Victorian storm hit, but IAG’s exposure to the $120m of expected claims in Queensland is thought to be relatively small.

Suncorp, which faces a maximum loss of $200m before its reinsurance kicks in, said it had nothing to add to its previous guidance. The Queensland-based company, which Canada Goose Jackets Toronto operates a range of brands, including GIO and AAMI, has received more than 12,500 claims from the storm and about 1300 from the floods. Its shares rose 2c yesterday to $8.52.

QBE, the nation’s other big publicly listed insurer, declined to comment.

The Insurance Council of Australia said the latest claims figure for the Victorian storm was $256m. But Macquarie has estimated the eventual scale of the loss for the insurance industry to be at the top end of a $400m to $1 billion range.

Credit Suisse analyst Arjan van Veen said the revised guidance might mean a drop of about 5 per cent in IAG’s full-year results, but it made no real difference for the 2010-11 financial year or the company’s overall prospects.