Suncorp and Insurance Australia Group will likely face more severe losses than what they have priced into their catastrophe budgets, Morgan Stanley warns.
The prospect of another La Niña weather event threatens the earnings and dividends of Suncorp and Insurance Australia Group, whose losses could be more severe than indicated in their catastrophe budgets, warns Morgan Stanley.earlier this year on their bottom lines, both insurers are facing a third consecutive La Niña in Australia in spring.
“We see earnings and dividend risks for Suncorp and Insurance Australia, plus less capital optionality as both began the 2023 financial year with little excess capital.”The broker noted that on four occasions since 1970, catastrophe losses reached more than $5 billion when a negative IOD preceded a La Niña event.
“If a third La Niña season eventuates, losses are likely to be more severe than what Suncorp and Insurance Australia have priced into [catastrophe] budgets,” Mr Stadnik said. The broker pointed out that both Suncorp and IAG have little excess capital that could spill over into dividends over the next 12 months.
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