Insurance Australia Group (IAG) has released its financial results for the 2020 financial year, confirming it will not pay shareholders a final dividend after reporting a net profit after tax of $435 million for FY2020, a drop of 59.6 per cent on 2019’s figure.
IAG’s insurance profit was down by 39.5 per cent to $741 million, impacted by claims payouts following bushfires and hailstorms in NSW, Victoria and the ACT, along with higher re-insurance costs. The group said lower motor claims frequency, particularly in April and May, was partially offset from claims in other COVID-19 affected classes such as landlords’ insurance and travel insurance.
Gross Written Premium (GWP) grew 1.1 per cent to $12.135 billion, which Managing Director and CEO of IAG Peter Harmer said was “in line with our guidance, despite incurring a slight negative effect from COVID-19 in the second half from lower new business volumes”.
As part of the financial results, IAG announced a FY2020 reported insurance margin of 10.1 per cent – down from 16.9 per cent in FY2019 – along with an underlying insurance margin of 16.5 per cent, compared to 16.6 in FY2019.
“Our FY2020 reported margin of 10.1 per cent fell outside our guidance of 12.5 to 14.5 per cent due to the higher than expected levels of natural peril events, a strengthening of our reserves mainly in the liability, professional risks, and workers’ compensation areas, and credit spread effects. COVID-19 impacts on our underwriting profit likely offset each other,” said Harmer.
“Our underlying margin was 16.5 per cent, impacted by a soft second half owing to high re-insurance costs, lower interest rates continuing to impact investment income, and a poor performance from our commercial longtail classes in Australia.”
IAG said exiting from its India investment, which realised a post-tax profit of $326 million, was partially offset by a customer refunds provision of $141 million relating to a number of multi-year pricing issues where some customers did not always receive the discounts they were entitled to.
Harmer said IAG will continue to simplify and optimise the group’s core insurance business while creating future growth opportunities.
“We will continue to shift our focus towards customer-led growth – leveraging our data, customer reach and brands to enhance their core insurance business. The COVID-19 pandemic has accelerated customers’ adoption of digital channels and we are assessing the opportunities this presents to build on our existing strategy.”