Wednesday 16 May 2018 by FIIG Research Company factsheets

Insurance Australia Group AUD 3mBBSW+2.10% 15-Jun-44 Subordinated Tier 2 Notes Factsheet


Insurance Australia Group AUD 3mBBSW+2.10% 15-Jun-44 Subordinated Tier 2 Notes Factsheet

Insurance Australia Group Limited (IAG, Issuer, Group) is the parent company of a general insurance group with controlled operations in Australia, New Zealand, Thailand, Vietnam and Indonesia. Its businesses underwrite over AUD11bn of premium per annum, selling insurance under many leading brands, including: NRMA Insurance, CGU, SGIC, Swann Insurance and WFI (Australia); NZI, State, AMI and Lumley Insurance (New Zealand), Safety and NZI (Thailand); AAA Assurance (Vietnam); and Asuransi Perolamas (Indonesia). Standard & Poor’s has assigned a ‘Very Strong’ Insurer Financial Strength Rating of AA- to the Group’s core operating subsidiaries and the Group is rated A, with a Stable outlook.

IAG is an ASX Top 25 company with a market capitalisation over AUD17bn as of 23 March 2018 (ASX: IAG). The group employs over 15,000 people and is regulated by APRA. In June 2015, IAG established a long-term strategic relationship with Berkshire Hathaway Inc, when Berkshire Hathaway acquired a 3.7% stake in IAG via an AUD500m placement. This has enabled both parties to draw on each other’s strengths to better meet customer needs and deliver superior business outcomes. The initial agreement included a 10-year 20% quota share agreement across IAG’s consolidated insurance business to help reduce IAG’s earnings volatility and capital requirements.

IAG uses reinsurance to limit exposure to large single claims as well as the accumulation of claims that arise from the same or similar events. Risks underwritten are also reinsured in order to stabilise earnings and protect capital resources. IAG purchases catastrophe reinsurance cover primarily on a calendar year basis. The program renewed at 1 January 2018, was constructed in a similar manner to prior years and provides up to AUD8bn gross reinsurance protection.

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