IAG’s Partial Franking on Capital Notes 3 Signals Confidence Amid Market Uncertainty
Insurance Australia Group Limited has announced a quarterly distribution of AUD 1.5191 per Capital Note 3 security, partially franked at 60%, payable on March 17, 2025.
- AUD 1.5191 distribution per Capital Note 3 security
- Distribution is 60% franked, reflecting partial tax credits
- Ex-date set for March 4, 2025; payment on March 17, 2025
- Distribution rate calculated at 6.0931% annualised for the quarter
- No additional approvals required for the dividend payment
Distribution Announcement Overview
Insurance Australia Group Limited (ASX: IAG) has confirmed a quarterly distribution of AUD 1.5191 per security on its Capital Notes 3 (ASX: IAGPF). This payment is scheduled for March 17, 2025, with an ex-date of March 4 and a record date of March 5. The distribution reflects the company’s ongoing commitment to providing steady income streams to its hybrid security holders.
Details of the Distribution Rate and Franking
The announced distribution is partially franked at 60%, translating to a franked amount of AUD 0.9115 and an unfranked portion of AUD 0.6076 per security. This partial franking provides investors with a tax credit on 60% of the distribution, enhancing the after-tax yield. The total annualised distribution rate for the quarter is calculated at 6.0931%, derived from the sum of the 3-month Bank Bill reference rate of 4.4599% plus a fixed margin of 3.20%, adjusted for franking.
Capital Notes 3 Terms and Market Context
The margin of 3.20% was set at the time of issue and remains fixed, providing predictability for investors. The base reference rate is reset quarterly, reflecting prevailing market conditions. This hybrid security is perpetual and non-cumulative, meaning distributions are paid at the issuer’s discretion and may not accumulate if skipped. However, the consistent payment signals IAG’s confidence in its capital position and earnings stability.
Implications for Investors and Market Sentiment
For investors, the partial franking and attractive yield make Capital Notes 3 a compelling income option within the insurance sector’s hybrid securities space. The absence of any required approvals or conditions for this distribution underscores a smooth operational environment. Market participants will be watching closely for any shifts in the reference rate or margin that could impact future distributions.
Looking Ahead
As IAG continues to navigate a competitive insurance landscape, maintaining steady distributions on hybrid securities will be key to sustaining investor confidence. The upcoming ex-date on March 4 will be a focal point for trading activity, with investors positioning themselves ahead of the payment date.
Bottom Line?
IAG’s steady distribution on Capital Notes 3 reinforces its financial resilience but invites scrutiny on future rate resets amid market shifts.
Questions in the middle?
- How will changes in the 3-month Bank Bill rate affect future Capital Notes 3 distributions?
- What is IAG’s strategy for managing hybrid capital costs in a rising interest rate environment?
- Could shifts in franking policy or tax rates impact the attractiveness of these distributions?
