The Insurance Australia Group Ltd (ASX: IAG) share price is marginally higher at $8.01 this morning after the insurance giant revealed a deal to sell its entire 26% interest in Indian insurer SBI General Insurance Company.
According to the announcement IAG is expecting to receive an FX-adjusted $640 million for the sale that will result in a net profit around $300 to be reflected in IAG’s bottom line over FY 2020. T
he insurer also reported that the deal will improve its regulatory capital adequacy position by more than $400 million.
IAG is guiding for gross written premium (GWP) growth around 3% in FY 2020 with underlying margins (GWP – claims and other costs) across its Australian operations expected to tick marginally higher.
The group has divested many of its Asian and overseas operations recently as it found it hard to maintain acceptable profit margins as risk was hard to price and claims costs and had a tendency to blow out in exotic markets.
In a similar way to QBE Insurance Group Ltd (ASX: QBE) it’s now focusing on the more profitable and reliable home markets of Australia and New Zealand.
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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Insurance Australia Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.