IAG signs deal with trio of reinsurers
Insurance giant IAG has signed a reinsurance deal with three European businesses to share a portion of its premiums and expenses from next year.
SYDNEY - [AAP] Insurance giant IAG (ASX: IAG) has signed a reinsurance deal with three European businesses to share a portion of its premiums and expenses from next year.
Under the deal, to start in January, reinsurers Munich Re, Swiss Re and Hannover Re will receive a combined 12.5 per cent of IAG's gross earned premium and will pay the same percentage of claims and expenses across its Australia, New Zealand and Thailand divisions.
The three agreements, which have an average initial period of more than five years, build on a similar, yet larger deal IAG signed with Warren Buffett's Berkshire Hathaway more than two years ago and are expected to deliver similar benefits.
IAG says the new agreements will help reduce regulatory capital requirement by about $435 million over three years and reduce earnings volatility--with a portion of insurance risk effectively exchanged for a more stable fee income stream.
It will also receive an exchange commission for access to its franchise.
The insurer said the deal is expected to boost IAG's reported insurance margin by about 250 basis points per year but will not have an effect on the company's first-half results in the 2018 financial year.
© [2017] Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.
This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.
