New Delhi

Shares of Insurance Australia Group Ltd. surged as much as 9 per cent on Friday after securing reinsurance protection from a unit of Berkshire Hathaway and Canada Life Reinsurance to shield itself from swings in financial markets for five years.

The stock climbed as high as A$7.280, its highest level since January 24, 2020, by 00:49 GMT. With that steep rise, securing the status of a top gainer in the benchmark S&P/ASX 200 index.

The Sydney-based insurer said such reinsurance agreements would add an extra layer of protection of up to A$680 million ($451.86 million) per annum, amounting to A$2.8 billion in a span of five years. As per IAG, this reinsurance would put a lid on natural perils costs of A$1.28 billion in FY25.

The agreements would "provide greater certainty over the cost of natural perils cover for customers, stabilise earnings and reduce capital requirements," said IAG Managing Director and CEO Nick Hawkins. This would put the company itself and generally all its stakeholders on a more predictable financial footing.

It additionally reaffirmed its full-year insurance profit and margin goal at the higher end of its outlook variety. As indicated by Citi experts, IAG's forecast is broadly in line with the brokerage's forecasts of 14.8 per cent, and Visible Alpha consensus forecast of 14.6 per cent, while suggesting "the benefit to reported margin is likely due to favourable weather."

IAG also reiterated fiscal 2024 gross written premium growth will be in line with the "low-double digit" growth guidance updated in February, indicating that the company is very confident of delivering another strong performance in fiscal 2024 as well.

IAG has successfully completed its strategic reinsurance deals, increasing the value of its stocks and moving the firm toward better financial positioning. Substantial reinsurance protection in place insulates it against natural perils and places it on a fairground to stabilise its earnings. IAG exhibits a rather forward-looking disposition, simply underscoring its commitment to protecting its financial health and delivering safe results to shareholders.