Shares in online comparator iSelect slumped to their lowest level in more than two months after the company revealed a cut in commissions would reduce earnings.

iSelect stock closed at $1.22 on the Australian Securities Exchange on Friday, its lowest since November 29. It was priced at $1.85 in an initial public offering in June.

Earlier in the week the company announced it had signed a two-year distribution agreement at a lower commission rate with Auto & General Services, a South African insurer that operates under the Budget brand in Australia.

The new rates will have a negative effect on 2013/14 second-half revenue and earnings before interest, tax, depreciation and amortisation of $1 million to $2 million.

The net financial effect will depend on sales volumes in the car business and the proportion of those sales referred to Auto & General.

The agreement – which extends a five-year commercial relationship – allows iSelect to sell an expanded range of Auto & General comprehensive motor vehicle insurance products.