IAG downgrades profit guidance as flood claims pile up

Insurer IAG has downgraded its annual profit guidance as claims across its brands from floods and storms in NSW and Queensland hit 24,000.

Debris outside a flood-damaged house in Goodna, west of Brisbane. Picture: NCA NewsWire/Dan Peled

Insurer IAG has downgraded its annual profit guidance as claims across its brands from floods and storms in NSW and Queensland hit 24,000.

The insurance giant said it had received about 3500 claims from widespread flooding across Sydney over the last three days.

IAG said it had extensive reinsurance protection in place and as a consequence estimated it would incur a net claims cost of about $74m from the storm and flooding event that commenced in February.

That is lower than the $95m estimate on March 1 due to development on previous claims which further eroded the FY22 aggregate deductible and reduced the net claims cost.

IAG said had used about $95m of the $236m of aggregate cover following this event. It expected its net natural perils claims costs for the 2022 financial year to increase to $1.1bn, compared to a previous estimate of $1.045bn. The revised estimate includes $920m for the eight months to February 28, including the $74m net cost and about $180m for the remaining months of the year to June 30.

IAG on Wednesday reaffirmed its reported margin guidance range of 10-12 per cent, but following the increase in estimated natural perils claims costs it expected a result in the lower half of the guidance range.

IAG said after allowing for quota share arrangements, the combination of all catastrophe covers resulted in it having a maximum event retention of $34m. It also acknowledged a range of factors impacting the external environment, including equity market volatility in recent months.

Managing director Nick Hawkins said work had started on assessments and emergency repairs in impacted areas and the group was securing temporary accommodation for customers who could not return to their homes.

“As weather is still affecting the eastern seaboard and given limited access to impacted areas, it is too early to determine the number and nature of claims, which are expected to rise over the coming days.”

Mr Hawkins said communities and infrastructure needed to be rebuilt stronger in order to prevent future destruction.

“We urge governments to work with insurers and communities to identify and invest in mitigation and take action to improve land planning and building codes and other resilience measures,” he said. “This needs to be a priority.”

The Insurance Council of Australia said insurers have received 107,844 claims related to the Queensland and NSW floods. It said 65 per cent of claims were from Queensland and 35 per cent are from NSW.

Originally published as IAG downgrades profit guidance as flood claims pile up