(Reuters) - Insurance Australia Group (IAG.AX) cut its fiscal 2020 insurance margin guidance on Friday after a surge in claims from recent hailstorms in the country’s east coast, sending its shares sliding to their biggest one-day decline in more than 17 months.
The update comes at a time when insurers have been inundated with claims as Australia faces a tumultuous summer marked by wildfires, drought, dust storms and hailstorms.
Australia’s largest general insurer, IAG, expects its 2020 insurance margin, a key profitability metric, in the range of 14.5%-16.5%, lower than its previous forecast of 16%-18%.
The company said it received more than 28,000 claims relating to the hailstorms earlier this month that wrecked havoc in Melbourne, Canberra and Sydney, and forecast a pre-tax cost of A$169 million ($115.58 million) from the claims.
Earlier this week, capital Canberra saw cricket ball-sized hail stones amid bushfire smoke that left the air among the most toxic in the world.
IAG shares fell as much as 6.4% and closed down 5.4% on Friday. That was their biggest one-day fall since mid-August 2018 and the lowest close since February of last year.
“Unfortunately, it just highlighted to the market that these are really unpredictable events and insurance companies really are at the mercy of the weather,” said Henry Jennings, senior analyst and portfolio manager at Marcus Today, which has exposure to IAG in a model portfolio.
The insurer on Friday raised its net natural peril claim costs for 2020 by A$74 million to A$715 million, assuming no further major events up to June 30.
IAG in early January pegged net claim costs from natural disasters at A$400 million for the first half of fiscal 2020 in the wake of a deadly season of bushfires that has now killed 32 people and ravaged bushland larger than the size of Austria.
The company also said its first-half results, which are due on Feb. 12, will include a net post-tax provision of about A$80 million for customer refunds.
Reporting by Shreya Mariam Job and Niyati Shetty in Bengaluru; Editing by Arun Koyyur and Muralikumar Anantharaman