IAG prepares for higher reserve releases, raises FY 2017 margin guidance

Insurance Australia Group (IAG)  said on June 28 that a preliminary review of the financial year ending June 30, 2017, indicates reserve releases of at least 5 percent of net earned premium.

Previously, the general insurance group had guided for reserve releases of at least 2 percent of net earned premium.

The reserve releases predominantly relate to Australian long tail classes, comprising compulsory third party insurance, liability, professional risks and workers’ compensation, the company noted. The higher indicated outcome, compared to previous expectations, reflects further favourable experience against underlying assumptions for claim size and inflation.

It remains IAG’s long term expectation that reserve releases will represent around 1 percent of net earned premium in any given year, as embodied in its underlying margin calculation.

As a result of the expected increase in reserve releases, IAG has raised its reported margin guidance range for the 2017 full year to 13.5-15.5 percent from 10.5-12.5 percent.

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