Inflation easing as insurer IAG announces share buy back and premium rises
IAG, which writes cover for NRMA, RACV, and CGU, said it was seeing inflation moderate after pushing through an 11.3 per cent increase in premiums.
Insurance Australia Group, operator of some the country’s biggest brands, will hand shareholders a $350m buyback after ruling off a 7.9 per cent lift in profits to $898m.
Unveiling its full year earnings on Wednesday, IAG fell short of analysts’ expectations of $991m.
But the insurer ruled off a 79.1 per cent jump in profits from its insurance division to $1.43bn driven by a surge in premiums across the group.
IAG chief executive Nick Hawkins said it was now more resilient and streamlined.
IAG, which writes insurance in Australia and New Zealand for homes, motor, and commercial operations, said it had lifted premiums across the group by 11.3 per cent in the year.
This took total gross written premiums to $16.4bn.
Net earned premiums were up 11 per cent to $9.2bn.
IAG has several quota share agreements that see its partners pick up losses from claims as well as take a slice of the insurer’s premiums.
Mr Hawkins, who took on the top job in November 2020, said IAG was now seeing a slower rise in costs.
“We have previously said inflation, increasing weather volatility, and rising reinsurance costs were major factors affecting customer premiums,” he said.
“We are beginning to see some signs of inflation easing, and our long-term reinsurance agreement announced in June is expected to reduce year-on-year volatility from extreme weather events and help stabilise costs for our customers over the longer term.”
IAG delivered strongest growth in premiums from its Australian and New Zealand business, while the intermediated operation which writes commercial cover lagged the group.
IAG pushed through a 12.8 per cent increase in Australian premiums, with the division reporting a 19 per cent jump in profits to $654m.
The intermediated Australian business saw profits surge 57 per cent to $328m, exceeding the division’s $250m target.
This came despite only a 6.4 per cent increase in premiums to $5.1bn.
New Zealand saw a 15.6 per cent increase in premiums, with the division delivering a $457m profit after its $44m profit results in 2023 after massive floods.
Mr Hawkins said IAG recognised “premium increases are affecting customers”.
“We’ve bolstered our support for those impacted by cost-of-living pressures,” he said.
“Our specialised customer care teams are helping those in financial hardship by finding tailored solutions and providing extra support.”
IAG paid $10.7bn in claims across its brands in the year.
IAG declared a 17c final dividend, taking full year returns from the insurer to $27c, 80 per cent higher than last year.
The insurer also announced a $350m buy back.
In guidance, IAG said it would continue to invest in its Commercial Enablement tech platform for its broker network as well as optimising its capital structure.
IAG guided “mid-to-high single digit” growth in premiums in the year ahead, targeting a reported insurance profit of $1.4 to $1.6bn.
The insurer also lifted its natural perils allowance by 17 per cent to $1.28bn.
IAG last traded at $7.44.
More Coverage
AMP chair calls for ‘better balance’ in financial advice sector
Australia’s financial advice model requires less complexity, with those who need guidance and assistance probably being priced out of the market, AMP chairman Mike Hirst has warned.
Bad bank loans ‘to haunt home lenders’
A rising tide of bad home loans could trigger a sell-off in bank shares, Citi analysts have warned.