Stockwatch

There’s nothing like a profit warning to spook investors. Insurance Australia Group (IAG) revealed that Equity Red Star’s full-year 2010 results would be hit with a A$365m (£207m) charge to boost claim reserves. This cuts its expected insurance margin to 6%-7% from previous guidance of 9.5%-11%.

Accordingly, IAG’s stock closed 6.1% down. The company blamed deteriorating UK claims experience, in particular bodily injury claims, for the reserve strengthening. Previous actuarial reviews had highlighted increased costs of bodily injury claims in the 2007 and prior underwriting years, but the latest review uncovered problems in subsequent years. Half of the reserve strengthening relates to 2008 and 2009, which had previously not been subject to reserve increases.

So far, UK motor and general insurers’ stock prices seem to have been largely unshaken by IAG’s news.

Prices

Market indices Movers price 7-day Currency

FTSE 100 5,069.06 Aviva 323.40 -1.58% Dollar 1.45

FTSE 250 9,477.70 Admiral 1,323.00 +0.6% Euro 1.21

FTSE All-share 2,614.84 RSA 118.70 0% Yen 132.75