Investors of ASX 200 insurance companies may not be too pleased today.
The sector is underperforming the market as The Australian reports the industry is bracing for a wave of claims in the wake of this morning’s Melbourne earthquake.
At the time of writing, shares in Insurance Australia Group Ltd (ASX: IAG) are $4.92 – down 1.99%, QBE Insurance Group Ltd (ASX: QBE) shares are $11.31 – up 0.31%, and Suncorp Group Ltd (ASX: SUN) is trading for $12.31 – down 1.01%. The S&P/ASX 200 Index (ASX: XJO) is 0.84% higher.
Let’s take a closer look at today’s news.
Earthquake strikes Victoria
Just after 9 this morning, a 5.9 magnitude earthquake struck 10km from the Victorian town of Mansfield. Heavy shaking was felt in Melbourne with tremors felt in Tasmania, the ACT, and even Sydney.
A video circulating social media shows the damage experienced by at least one building on Melbourne’s popular Chapel Street.
While the extent of the damage is unclear following the earthquake and subsequent aftershocks at the moment, investors in ASX 200 insurance companies aren’t taking any chances.
For FY22, IAG increased its natural perils (i.e., disasters) allowance from $658 million to $765 million. QBE was already above its allocated amount when it released its half-year results and Suncorp also increased its allowance for the current financial year to $980 million.
Considering this is the most powerful earthquake in Victoria since European settlement, at least according to one seismologist, this may not have been the forecasts of these ASX 200 insurers.
According to The Australian, insurers lost $3.2 billion the last time Australia had such a powerful earthquake – the 1989 tremor that hit Newcastle.
ASX 200 insurers share price snapshot
Over the past 12 months, the IAG share price has increased 10.1%, the QBE share price lifted 29.6%, and the Suncorp share price jumped 46.3%.
QBE and Suncorp have overperformed the S&P/ASX 200 Index (ASX: XJO) over the same period while IAG has underperformed the index by about 16 percentage points.
The market capitalisations of these companies range from $12-$17 billion.