Insurance giant IAG posts $900 million profit on the back of rising premiums

Australia’s largest insurer has blamed rising construction and labour costs on soaring insurance premiums, and said while cost challenges had eased, customers would again be slugged with premium increases above inflation this year.

Insurance Australia Group (IAG) on Wednesday reported net profit after tax in the last financial year climbed 8 per cent to $900 million, with gross written premiums surging 11 per cent to $16.4 billion on the back of rising motor insurance (up 13 per cent) and home insurance (up 16 per cent).

IAG chief executive Nick Hawkins said there were a number of contributors to the rising premiums. Credit: Louie Douvis

It flagged an up to 9 per cent increase on premiums in the 2025 financial year, the same guidance Suncorp provided on Monday.

“We’re very aware of challenges in the community and business … over the last couple of years,” said IAG chief executive Nick Hawkins. “We provided 20,000 customers with financial support, invested heavily in our people, making sure we’re identifying as quickly as possible vulnerable customers.”

Despite cost-of-living pressures, and with insurance prices a key driver of the consumer price index, Hawkins said IAG, the insurer behind the RACV and NRMA brands, had retained 90 per cent of customers, in line with historical averages.

The most recent Australian Bureau of Statistics data shows insurance costs grew 14 per cent in the June quarter, down from a high of 16.4 per cent in the prior corresponding period, but significantly ahead of inflation, which eased to 3.8 per cent in June.

IAG reported a 13 per cent increase in Australian premiums, posting a 19 per cent jump in profits to $654 million.

Hawkins said while motor insurance premiums were easing, the property sector continued to pose challenges. He said tradie costs in Victoria, where much of the workforce is heavily unionised under the CFMEU, had soared 18 per cent year-on-year, while the price of materials surged 10 per cent.

“The thing Australia needs to focus on now is where we’re building,” he said. “We’ve built in places we shouldn’t, let’s not make more mistakes.”

He said that amid the rush to build more housing, it was critical governments and developers maintained high-quality building standards to prevent problems arising in the future.

Tradie costs and the price of building materials had surged, said IAG’s chief. Credit: Louie Douvis

Hawkins also echoed Suncorp’s statements that burst flexi pipes, installed more than a decade ago, were causing significant flooding issues, while lithium batteries were exacerbating the severity of house fires.

IAG paid $10.7 billion in claims in the last financial year.

The insurer declared a full-year dividend of 27¢, representing more than 70 per cent of its profits. It also announced a $350 million buyback.

Barrenjoey analysts Andrew Adams and Niva Chandrasekaran said IAG’s cash earnings fell short of expectations due to lower investment income.

“IAG’s result demonstrated attritional loss ratio improvement, and home and motor rate increases in [the second half] were in line or stronger than [the first half],” they said.

IAG shares fell almost 3 per cent in late trade on Wednesday.

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