The Insurance Australia Group Ltd (ASX: IAG) share price has been struggling this month after being driven downwards by a single announcement.
IAG downgraded its guidance for financial year 2022 on 2 November after natural events ravaged parts of Australia.
At the final close of October, the IAG share price was $4.80. It is currently trading for $4.55, representing a 5.2% fall.
Let’s take a closer look at the news that has weighed on the company’s stock this month.
IAG share price suffers after change to guidance
The IAG share price sunk 7% on the back of its guidance downgrade and it hasn’t recovered yet.
The company stated that its profits would be less than previously predicted this financial year after it had to up its predicted net natural perils claim costs.
It now plans to fork out $1.045 billion in natural perils claims over this financial year. That’s up from its previous guidance of $765 million.
The increase came after IAG had to pay out $535 million to its customers over the first four months of financial year 2022.
Additionally, it came only days after a weather event that may have caused $169 million worth of damage to parts of South Australia, Victoria, and Queensland. That’s the maximum retention for a first loss under IAG’s catastrophe program.
As of 1 November, IAG had received around 14,000 claims from customers impacted by the severe weather event.
In a release, IAG stated the increase in net natural perils claim costs is equal to around 360 basis points at the reported insurance margin level.
The company, therefore, dropped its financial year 2022 reported insurance margin guidance range to between 10% to 12%. That was down from 13.5% to 15.5%.
Currently, the IAG share price is 3.6% lower than it was at the start of 2021. It has also fallen 14.7% since this time last year.