SYDNEY (Reuters) – Insurance Australia Group (IAG) saw its shares surge by 9% on Friday following strategic reinsurance agreements with Berkshire Hathaway’s unit and Canada Life Reinsurance. The move aims to bolster financial stability over the next five years amidst market volatility.
IAG shares peaked at A$7.280, marking their highest level since January 24, 2020, propelling the company to the top of the S&P/ASX 200 index.
The Sydney-based insurer disclosed that these agreements will offer up to A$680 million ($451.86 million) in additional annual protection, amounting to A$2.8 billion over the contract period. This initiative is designed to cap natural peril costs at A$1.28 billion for FY25.
“This reinsurance will enhance predictability in natural peril coverage for our customers, stabilize earnings, and reduce capital demands,” stated Nick Hawkins, Managing Director and CEO of IAG.
The company affirmed its full-year targets for insurance profit and margin, aiming towards the upper end of its projected range. Analysts from Citi noted that IAG’s forecasts align closely with their expectations and market consensus, highlighting potential margin gains attributed to favorable weather conditions.
Looking ahead, IAG anticipates its fiscal 2024 gross written premium to remain in line with earlier projections of “low-double digit” growth, reinforcing its strategic growth trajectory.
(Note: $1 = 1.5049 Australian dollars)
