Iag holds guidance as qbe and boq withdraw forecasts


Iag holds guidance as qbe and boq withdraw forecasts

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Insurance Australia Group has bucked the trend of companies pulling profit guidance, with the extreme volatility in the markets delivering a smaller-than-expected hit to its books.


IAG's decision to reaffirm its previous revenue and profit margin forecasts is in contrast to its peers, with financial services groups QBE and Bank of Queensland both retracting their


respective guidance on Monday. IAG, the insurer behind brands including NRMA and CGU, on Monday said its technical reserves had suffered a unrealised loss of $100 million because of the


recent widening in credit spreads. Even so, Bell Potter analyst TS Lim said the damage was lighter than he had expected and IAG's underlying business so far appeared "strong".


The insurance giant also forecast gross written premiums would grow in the low single digits and a reported margin range of between 12.5 per cent and 14.5 per cent. Mr Lim said if there is


a recession, as most in the market expect, then history suggested insurance company revenue from premiums would take a hit. However, he added the impact of recessions on insurance companies


was generally more of a short-term hit, compared with banks, that suffered the consequences for a longer period. "If you look longer term, it [revenue] has very little correlation with


unemployment," Mr Lim said. IAG also said on Monday it had completed the sale of its 26 per cent stake in Indian insurance company SBI General, a deal that will deliver a net profit on


sale of $310 million to the insurer. The insurer's shares spiked 11 per cent to $6.40 on Monday as the broader market surged 7 per cent. The more globally-focused QBE, on the other


hand, joined the flood of large Australian companies in pulling its profit guidance on Monday, with chief executive Pat Regan citing the "extraordinarily difficult times" caused by


the coronavirus crisis. QBE withdrew its 2020 guidance for net investment returns of 2.5 to 3 per cent and the combined operating ratio, which compares claims and expenses with revenue, of


93.5 per cent to 95.5 per cent. QBE said premium rate growth had continued in the March quarter, while its liquidity and capital position were "strong," but added: "In light


of the unprecedented COVID-19 pandemic and uncertain economic and investment market outlook, we consider it prudent to withdraw those previously advised targets." Bank of Queensland has


also cited the "highly uncertain environment" as it pulled guidance, and said it would no longer seek approval from the Australian Prudential Regulation Authority for an exemption


that would have allowed the bank to pay out more in dividends than it made in profit. Mr Lim said BOQ was likely to cut its dividend. BOQ shares rose 5.7 per cent to $5.05 and QBE shares


jumped 6.7 per cent to $8.60. Clancy Yeates is deputy business editor. He has covered banking and financial services, and was previously national business correspondent in the Canberra


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