Insurance Australia Group (ASX: $IAG) has announced the purchase of reinsurance protection to mitigate natural perils volatility for the next five years, alongside securing adverse development protection for its $2.5b long-tail reserves. The company is on track to achieve FY24 Reported Insurance Profit and Margin around the upper end of guidance ranges.
Today's announcement is an important milestone in our strategy to create a stronger, more resilient IAG. Our long-term relationships with leading global reinsurers have allowed us to secure an innovative reinsurance arrangement that benefits our customers and shareholders. It will provide greater certainty over the cost of natural perils cover for our customers, stabilise our earnings and reduce our capital requirements. This cover, combined with the long-tail protection we are announcing today, provides IAG with a strong capital base on which to continue to develop our business in Australia and New Zealand. Investment in our brands and customers continues and the business now has more than five million insurance policies migrating to our new Enterprise Platform technology. We are already seeing improvements to the customer experience as well as delivering the business the ability to better price and manage risk. The platform is designed to support our existing business and allows us to execute at scale. We expect to accelerate the rollout of the platform through the remainder of the calendar year. We're also pleased to confirm that we're on track to achieve FY24 Reported Insurance Profit and Margin around the upper end of guidance ranges we set at the beginning of the financial year.
IAG has taken significant steps to reduce earnings volatility by securing long-term reinsurance agreements with Berkshire Hathaway and Canada Life Reinsurance, providing natural perils volatility protection and adverse development cover. These agreements are expected to deliver an estimated capital benefit of around $350m. The company is also on track to achieve FY24 Reported Insurance Profit and Margin around the upper end of guidance ranges. With a focus on creating a stronger and more resilient IAG, the company's strategic reinsurance arrangements aim to provide greater certainty over the cost of natural perils cover for customers, stabilize earnings, and reduce capital requirements. IAG's ambitions include delivering improved customer experience, executing at scale, and achieving increased Return on Equity 'through the cycle' target of between 14% and 15%. The company will provide its formal FY25 guidance in conjunction with its FY24 results announcement on 21 August 2024.