Australia’s general insurance firm IAG has divested its entire 26% stake in SBI General Insurance, the insurance arm of Indian public sector lender SBI.

The transactions were initiated in October last year, which has now been completed.

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The Australian insurer is expected to book a net profit of approximately $310m on the sale to IAG in the second half of this year.

IAG’s capital position

Due to heavy incidence on natural perils, IAG’s Common Equity Tier 1 (CET1) ratio dropped from 1.15 on December 2019 to 1.09 by the end of February.

As of 27 March 2020, the CET1 ratio is anticipated to be range from 0.9 to 1.1.

This includes payments of an interim dividend of $231m on 25 March 2020 and completion of IAG’s stake sale in SBI.

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As a result of the sale completion, IAG has been completely exited SBI with a regulatory capital position of nearly $450m.

The March 2020 underwriting results are yet to be filed, the insurer said in a press release.

IAG’s unchanged guidance for FY2020

The insurer’s overall YTD profitability has decreased substantially due to the impact of natural peril claim costs.

However, its underlying business has shown strength in its performance.

The company’s unchanged guidance for FY2020 suggests a low single-digit GWP growth and a margin range of 12.5 to 14.5%.

At this quarter-end, IAG has incurred a $100m pre-tax loss on technical reserves investment income from widening credit spreads.

The insurer anticipates that the unrealised loss will be recovered as its securities mature.