By Alice Uribe

SYDNEY--Insurance Australia Group Ltd. will launch a 750 million Australian dollar (US$545.3 million) capital raising after local insurers lost a business interruption test case.

The Australian general insurer on Friday said it would take a A$865 million post-tax provision after assessing the potential impact of the decision by the Supreme Court of New South Wales.

This provision would lower IAG's regulatory capital by over A$950 million, and reduce its Common Equity Tier 1 ratio to the lower end of the insurer's target range, it said.

"IAG believes it is prudent to maintain its capital position above the upper end of its CET1 target range," it said.

The provision is estimated to have a net post-tax impact on IAG's fiscal 2021 earnings of approximately A$805 million.

The raising comprises a A$650 million underwritten institutional placement be conducted at a fixed price of A$5.05 per new share and a non-underwritten share purchase plan to raise up to A$100 million.

Write to Alice Uribe at alice.uribe@wsj.com

(END) Dow Jones Newswires

11-19-20 1829ET