The Insurance Australia Group Ltd (ASX: IAG) share price is trading more than 5% lower today after the company provided an update to its FY20. Here’s what you missed.

About Insurance Australia Group Ltd

Insurance Australia Group (IAG) is Australia’s largest insurance business — its direct heritage dates back to 1920.

IAG’s businesses underwrite over $11.4 billion of premium per annum, selling insurance under many brands, including: NRMA Insurance, CGU, SGIO, SGIC, Swann Insurance and WFI (Australia); and NZI, State, AMI and Lumley Insurance (New Zealand).

What Happened?

This morning, IAG announced that it now expects its FY20 reported insurance margin will be in the range of 14.5-16.5%, compared to the previous guidance of 16-18%.

Insurance margin is simply a ratio of insurance profit over net premium revenue.

The company explained this updated margin guidance was based on expected results for 1H20 and on a revised view of full-year net natural peril claim as a result of the recent hailstorm event.

Hailstorm Event

The hailstorms which impacted parts of Melbourne, Canberra and Sydney last Sunday and Monday will be treated as one event under IAG’s reinsurance arrangements.

Based on projected claim volumes and the severity of related damage, it is anticipated this event will result in a pre-tax cost to IAG of $169 million.

By 5pm on 23 January 2020, IAG had received over 28,000 claims resulting from the hailstorm event, with this figure expected to increase over the coming days. The majority of the claims relate to residential property and motor damage.

Speaking of motor damage, check out this Rask Education blog post to learn about the different types of car insurance and to consider which type is right for you.

IAG 1H20 Guidance

IAG expects gross written premium (GWP) growth of around 4.1% for 1H20, consistent with the “low single digit” GWP growth guidance provided for the full year.

In addition, IAG indicated its H1FY20 results will contain a post-tax provision of approximately $80 million for a customer refund program.

Now what?

IAG shares were last trading on the ASX at $7.305 — down 5.38%.

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