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Insurance Australia (ASX:IAG)- CEO, Nick Hawkins - The Market Herald
CEO, Nick Hawkins
Source: SMH
  • Insurance Australia Group (IAG) is looking to raise $750 million as it sets aside $865 million to cover the potential costs of COVID-19
  • On Wednesday, the NSW Supreme Court of Appeal told insurers it will have to issue COVID-19 payouts to businesses
  • However, the decision can be appealed in High Court and if that goes ahead there won't be a decision on the payouts until next year
  • To be on the safe side, the company is undertaking a $650 million placement and $100 million share purchase plan to cover the potential costs
  • Under the raise, IAG will offer new shares for $5.05 each, which represents a 7.5 per cent discount to IAG's last close
  • IAG last traded for $5.46 per share on November 18

Insurance Australia Group (IAG) is aiming to raise $750 million to prepare for the flood of claims it could potentially receive.

Just yesterday, the company paused trading following the COVID-19 payout ruling from the NSW Supreme Court of Appeal.

The court found COVID-19 is not a quarantinable disease (human diseases covered by the Quarantine Act 1908), leaving insurers unable to reject these claims.

However, the decision can be appealed with the High Court of Australia and IAG is in discussions with the Insurance Council of Australia. If the appeal goes ahead, the outcome will be expected next year.

To be on the safe side, IAG intends to fund a post-tax provision of $865 million with a $650 million placement and a share purchase plan of up to $100 million.

Under the raise, IAG will offer new shares for $5.05 each, which represents a 7.5 per cent discount to IAG's last close.

The insurance company has received a small number of business claims, but is expecting more since the High Court's ruling.

If the claims go ahead, businesses will only be allowed a payout for the time it was in lockdown. IAG does not expect to pay for any future state or national lockdowns after October 31, as policies have changed and now reference the Biosecurity Act.

Notably, CEO Nick Hawkins has only been in the role since the beginning of November and has already had a busy three weeks.

IAG last traded for $5.46 per share on November 18.


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