IAG says there is “limited scope” to pay a final dividend this year due to its forecast insurance profit and a slump in investment income on shareholder funds.

Severe corrections in equity and credit markets have caused income on shareholder funds to slide to a year-to-date loss of about $280 million pre-tax, as of the end of last month, IAG says today.

The weighting towards equities and alternative asset classes has fallen to under 30%, from 49% at the end of December, reflecting market impacts, reallocation of funds to fixed interest and cash and the conservative placement of proceeds from the sale of Indian business SBI General.

IAG says its underlying business performance remained strong for the nine-months to March 31and it has retained full-year market guidance for “low single digit” gross written premium growth and a reported insurance margin of 12.5-14.5%.

The outlook remains subject to uncertainties from the COVID-19 pandemic, surrounding economic conditions and investment markets, while the margin guidance also excludes an unrealised loss from a widening of credit spreads.

IAG reported a profit of $50 million on shareholder funds investment income in the first half of the financial year.

Technical reserves, which are set aside to cover insurance activities, were fully invested in fixed interest and cash and provided income of $81 million in the half.

IAG will make a final decision on the size of any final dividend in August, in line with its normal timetable.