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ASX 200 drops more than 1%, IAG falls 7.5%

The S&P/ASX 200 Index (ASX: XJO) dropped more than 1% today to 6,024 points.

Aside from the ongoing spread of COVID-19 around the world, the eye-for-an-eye ordering of consulate closures between the US and China is causing concern.

Here are some of the main headlines from today:

Insurance Australia Group Ltd (ASX: IAG) cancels its final dividend

IAG has announced today that it won’t pay a final dividend to shareholders. Its interim dividend of 10 cents per share paid earlier in the year already accounts for its policy of a dividend payout of 60% to 80% of annual cash earnings.

The insurance giant announced a few elements expected in its FY20 result.

The ASX 200 share expects to report that it achieved gross written premium (GWP) growth of around 1%. Management said this was consistent with its ‘low single digit’ guidance that it maintained throughout FY20.

It achieved an insurance margin of approximately 10%, with the shortfall against prior guidance of 12.5% to 14.5% largely driven by adverse natural perils, prior period reserving and credit spread factors.

IAG managing director Peter Harmer said: “We have experienced an immensely challenging second half to the 2020 financial year, characterised by severe natural peril activity, the disruption caused by the COVID-19 pandemic to our people, customers and suppliers, and the marked volatility in investment markets which has adversely impacted our results.

“We have seen some softening in our underlying margin in the second half. This stems from the combination of lower investment returns from diminishing interest rates, an increased reinsurance expense as we bolstered our protection following heavy perils incidence early in the calendar year, and some deterioration in Australian long tail loss ratios.”

The IAG share price fell around 7.5% today.

Big decline in property value for Vicinity Centres (ASX: VCX)

One of the ASX’s biggest property groups announced its portfolio valuation update today.

At 30 June 2020, Vicinity said its portfolio was worth 11.3% less compared to six months ago. In dollar terms, it amounted to a $1.79 billion fall in the valuation.

Independent valuers addressed market conditions by closely looking at underlying cashflows of the ASX 200 property business. They also considered the significant increasing of short to medium term allowance such as vacancy, downtime, leasing capital and lowering expectations for sales and market rental growth.

Whilst the overall portfolio fell by 11.3% in value, the flagship portfolio – consisting of Chadstone, premium CBD locations and DFO outlet centres – only saw a net valuation loss of 8.8%.

Vicinity Centre managing director and CEO Grant Kelley said: “Aside from Victoria which has had an increase in COVID-19 cases and recently reinstated stage 3 restrictions across metropolitan Melbourne, conditions across other Australian states continue to improve. For many of our centres, particularly those that are less reliant on office workers or tourists, customer visitation has returned to, or is close to, pre COVID-19 levels. Customer visitation across our portfolio is 68% of the prior year level, with 83% of stores trading. Excluding Victoria, portfolio customer visitation increase to 80%, with 95% of stores trading.”

Mr Kelley went on to say that further retail activity reduction could lead to lower valuations for its assets.

The Vicinity share price fell 2.5% today.

More COVID-19 provisions for Bank of Queensland Limited (ASX: BOQ)

BOQ saw its share price drop almost 4% after announcing its quarterly APRA update for the period ending 31 May 2020.

The ASX 200 regional bank said there was a $112 million increase in the loans that are 90+ days past due. That includes $58 million of customer loans where banking relief package applications have been processed subsequent to 31 May 2020. The rest relates to customers who didn’t elect to enter into a relief package or were ineligible.

The bank also said it has taken a further collective provision of $61 million during the third quarter of its FY20, bringing the total COVID-19 related collective provision to $71 million, the top end of its range.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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