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IAG flags earnings hit after hailstorms

Steven Deare
Insurer IAG has received more than 28,000 claims following hailstorms that hit the south-east coast

First the bushfires took a toll on Insurance Australia Group, now its coffers have been hit by the hailstorms that pounded Canberra, Melbourne and Sydney this week.

The insurer has warned its shareholders it has received more than 28,000 claims of home and vehicle damage from the hailstorms and expects them to result in an unexpected pre-tax cost of $169 million.

IAG expects its insurance profit margin - a ratio of how much money is made on each premium - to drop to between 14.5 per cent and 16.5 per cent from between 16 per cent and 18 per cent.

IAG operates home and car insurers including CGU and NRMA.

The bushfires that have ravaged Australia will also hit its first half results that come out on February 12.

Bushfire-related claims have cost IAG $439 million for the financial year to date.

The fires have claimed the lives of 32 people and razed countless homes and bushland.

Businesses including miner BHP Billiton have been hampered as workers take leave to protect homes and transport routes are cut.

Meanwhile, IAG is refunding customers who did not receive full discounts on their premiums in recent years.

The refunds, which include interest, could cost the business about $80 million.

IAG CEO Peter Harmer said a review of pricing systems uncovered the issue.

"We will put this right as quickly as possible," he said.

"We have a team in place which is working hard to identify individual customers who have been affected and to arrange refunds."

These payments will not affect insurance profit.

IAG reported the problem to the Australian Securities and Investments Commission in September.