IAG profit on ctp, page-6

The cycle is turning favourable for IAG in the commercial lines segment, but not without some volume loss.
In personal lines, there is risk of some reduction in volumes continuing or ultimately some margin pressure as efforts to restore volumes take shape with what management are trying to do...
At the current point in time, due to COVID-19-related concerns on affordability and loss of market share, IAG is struggling to pass on rising input costs, including reinsurance by way of higher direct premiums from what I am constantly reading.

IAG appears to have taken BI out as an issue with a very large provision and a capital raising.
The favourable BI second test case ruling suggests possibly a very large release but we will have to wait and see...

The DCF reflects earnings forecasts, with key metrics including a terminal insurance margin of 14.7%, a terminal growth rate of 3.0% and a risk discount rate of 9.0%.
So im think like with azj and it seems to be a lot more companies are starting to use it as a metric, franking credits at 70% of face value.
So im thinking BI releases that could be worth 30–40cps additional.

The company estimated storm events over the past few days that stretched between South Australia, Victoria and south-east Queensland cost $169m net of the quota share (QS) and catastrophe program.

This has pushed estimated perils costs to $535m for the first four months of FY22, with $204m to end of September, $142m for eastern Australian weather in October, $20m for attritional weather in October, and $169m for South Australian and Victorian weather events.
This is now $280m above allowances, equivalent to 3.6% of net equity premium (NEP).
As a result, IAG increased its estimate for natural perils claim costs to $1.045bn, versus previous guidance of $765m, implying perils claims of $510m for the remainder of the financial year.

Margin guidance was lowered from 13.5–15.5% to 10–12%.
IAG assumed the full impact from adverse perils activity to date, with no increase in likelihood of reinsurance recoveries.

I think this may be too conservative given the increased chance of recoveries in the aggregate $209m of the $270m post QS deductible has been eroded & im happy o be corrected on this as I am looking buy in at these levels now...

The event maximum event retention (MER) is now estimated at $95m.

Perils activity and reinsurance IAG flagged events for the three months to September amounted to $204m net, or $302m gross, compared with Suncorp Group at $231m gross....I always use them as a barometer of insurance here in AUS & NZ...
So for adjusting for IAG being 15% larger than Suncorp, it still equates to $270m adjusted for exposure.

Events in October until 25 October were $162m net or $240m gross, versus Suncorp at $206m gross, adjusting for exposure of 1.15x Suncorp is still $237m....but once again happy to be corrected.
Events for IAG in late October amounted to $169m net of QS or $250m gross.
I think IAG’s reinsurance is better for protecting from more medium-sized to larger events.

So where dos that leave us..well I think :
1) there appears some conservatism on not assuming material reinsurance recoveries.
2) Possible large business interruption related releases worth up to 30–40cps & thats a maybe...
3) IAG will likely see more than $125m in pre-QS lockdown frequency benefits.
After reading up on BOM and its website, through a long period of history suggests such perils experience is within the bounds of historical volatility it is not only climate change, but also bad luck, and there is a strong likelihood that insurers will seek to price retrospectively for this as they base price increases on average experience of the past five years.

As for CTP its minimal or bread & butter yeah...but what we can focus on going forward premiums going forward...
Although I say we, I have not bought in yet as im still doing homework on more numbers, but this is what I have got thus far and hence I usually never buy in at a bottom because im too busy reading shit...
Hope this helps
RDD