The Insurance Australia Group Ltd (ASX: IAG) share price is rising after releasing a Victorian storm and flood update.
What did IAG say?
The company has given an update after severe storms and flooding impacted parts of Victoria last week.
IAG has received around 4,300 claims, as of Tuesday 15 June 2021. This is predominately for property damage and expects claims to raise as residents return to their homes to inspect the damage.
The company’s net natural perils claim costs up to 31 May 2021 were approximately $660 million, including the net cost of Cyclone Seroja in Western Australia in April 2021.
After the Victorian storms and included estimated attritional peril claim costs in June, IAG estimates its FY21 net natural perils claim costs will be approximately $720 million to $743 million compared to the perils allowance of $658 million for this period and previous guidance of $660 million to $700 million.
The upper end of this range reflects IAG’s FY21 stop-loss protection for retained natural perils claim costs. IAG said this provides protection of $100 million in excess of $1.1 billion (that’s $68 million in excess of $743 million, after its quota share).
Management comments
IAG Executive General Manager of Direct Claims Luke Gallagher urged customers to stay safe as they return to inspect the damage to their properties, and follow the advice of emergency authorities. He said:
“Floodwater is extremely dangerous, so please take every precaution. We have assessors and builders on the ground ready to ensure our customers’ properties are safe and secure. We will contact those impacted to book in property assessments, so repairs can begin as soon as possible. We can also arrange emergency accommodation and provide immediate financial assistance for customers in need.”
Summary thoughts about IAG and the share price
The IAG share price is still down around 35% from the January 2020 level. Insurance companies seem to get hit regularly – at times of bad natural disasters and during recessions. That makes IAG unappealing in my opinion, particularly as it’s already a market leader in Australia with limited growth potential.
There might be ASX dividend shares with more reliable income on offer out there.
