IAG has provided an update on its preliminary fiscal year 2020-2021 (FY21) results, saying it expects to report a net loss of $427 million.
According to IAG, the preliminary results, which are subject to audit finalisation and board approval, “reflect sound underlying financial performance” offset by a number of unusual items, resulting in a reported net loss.
“Our underlying financial results for the year are sound and within expectations. However, we have had challenges with issues that have been identified and provisioned for in our preliminary results,” said Nick Hawkins, Managing Director and CEO of IAG.
“We have at our core a strong insurance business with trusted market leading brands, and we have worked hard and acted decisively to put in place changes that address these challenges and enable us to better deliver to our shareholders, employees, customers and our communities.
“I have built a strong leadership team with deep insurance and customer expertise and clear accountability for success. We have a new organisational structure that more clearly aligns the business with our customers, and we have a clear growth strategy for the future.
IAG expects its preliminary FY21 results will show:
- Gross Written Premium growth of 3.8 per cent
- Net Earned Premium of $7.473 billion, an increase of 1.5 per cent on FY20
- Underlying insurance margin of 14.7 per cent (FY20 was 16 per cent)
- Reported insurance margin of 13.5 per cent (FY20 was 10.1 per cent)
- Pre-tax gain on shareholders’ funds income of $306 million (FY20 was a loss of $181 million)
- Reported net loss of $427 million (FY20 was a net profit of $435 million), with a reported profit of $33 million in the second half of the 2020-2021 fiscal year (2H21)
- Cash earnings of $747 million (FY20 was cash earnings of $279 million)
IAG says the business interruption provision includes a pre-tax charge of $238 million in FY21 for customer refunds, with $163 million recognised in 2H21. An ongoing review of pricing systems and processes led to a pre-tax provision being raised in FY20 and 1H21 for multi-year pricing issues identified by IAG where discounts to premiums were not always applied in full. According to IAG, the remediation programme will complete over the next 12 to 24 months.
The group will announce its final FY21 results on 11 August following the completion of audit and board approval.
IAG said it has reintroduced guidance for the financial year to 30 June 2022, “given the sound underlying financial performance in FY21, the new operating model now embedded with new executive responsibilities, and less uncertainty in the economic outlook”. For FY22, this includes GWP guidance for ‘low single-digit’ growth in FY22 and reported insurance margin guidance of 13.5 to 15.5 per cent.
“While our adjusted underlying FY21 performance delivered an insurance margin of around 14 per cent, I’m confident that, with the steps we have in place, we will deliver business and customer growth,” Hawkins said.
“Our direct insurance businesses in Australia and New Zealand are growing and we expect this growth to continue as we build out our premium brands across Australia.
“We recognise that our Intermediated business has underperformed which is why I have set specific goals for this business to simplify its structure, upgrade its risk and underwriting disciplines, further strengthen relationships with broker partners, and improve its financial returns.”