IAG seeks reinsurance quota share deals to boost capital
Australian multiline carrier Insurance Australia Group (IAG) said on Aug. 23 that it is seeking additional reinsurance quota share opportunities while presenting its results for its 2017 financial year which ended on June 30.
As part of its broader capital management program, IAG is exploring additional reinsurance quota share opportunities with its counterparties which have the potential to further strengthen the company's regulatory capital position, according to the statement.
IAG described its capital position as at June-end as strong, with its common equity Tier 1 (CET1) ratio 1.09 against a target benchmark of 0.9-1.1.
However, after allowing for the final dividend, the adjusted CET1 ratio would be at the lower end of IAG’s benchmark range, while the prescribed capital amount (PCA) multiple would be slightly above the mid-point of the equivalent target range, the company noted.
Overall, IAG posted an insurance profit of A$1.3 billion, up from A$1.2 billion in the same period a year ago. The insurance margin increased to 14.9 percent from 14.3 percent over the period.
The improvement was driven by higher than expected prior period reserve releases, partially offset by a natural peril claim cost increase which resulted in an allowance overrun of over A$140 million, according to the statement.
Gross written premium (GWP) grew by 3.9 percent to A$11.8 billion, with like-for-like growth in excess of 4 percent. This was driven mainly by higher rates on short tail motor in response to claims inflation as well as continued momentum in IAG’s Australian commercial rates.
Overall, net profit after tax increased 48.6 percent to A$929 million, which included a significantly higher contribution from investment income on shareholders’ funds which reflects stronger equity markets.
“Today we delivered a sound result, bolstered by improved investment markets and higher than originally expected reserve releases from our long tail business,” CEO Peter Harmer said.
“Overall GWP growth reflects positive momentum in our commercial business and rate responses to claims inflation, particularly in our short tail motor insurance businesses in Australia and New Zealand.”
Harmer added that the company was well-advanced with its plans to address the rising cost of claims.
“We have a number of initiatives underway that look at how we can reduce the cost of managing claims in a way that creates affordable insurance options for customers both now and into the future. We expect these initiatives, which are being created in consultation with our customers, to be finalised in the first half of the 2018 financial year.”
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