IAG FY2023 Half-Year Profit Almost Tripled

IAG has announced a half-year 2023 net profit after tax of $468 million, an increase of 170 per cent on the corresponding H1 FY2022 figure of $173 million. The company also delivered its strongest first half gross written premium (GWP) growth in seven years, up 7.5 per cent (H1 FY2022: 6.2 per cent) despite “challenging economic conditions.”

According to IAG, GWP growth was driven by rate increases to offset high inflation in the supply chain and customer number growth in the motor and home portfolios.

The result included a post-tax COVID-19 business interruption provision benefit of $252 million.

Nick Hawkins, Managing Director and CEO of IAG, said the reported insurance margin of 8.5 per cent (H1 FY2022: 7.1 per cent) reflected growth across the business but was offset by the ongoing impacts of higher inflation on claims costs in Home and Motor. A $70 million unfavourable net natural perils experience and a $48 million prior year reserve strengthening also impacted the margin.

IAG’s expense ratio improved by 110 basis points to 22.9 per cent, with the company on track to maintain its full-year cost base of approximately $2.5 billion.

GWP grew by nine per cent in the Direct Insurance Australia (DIA) business. While the improvement was mostly due to rate increases, DIA experienced volume growth of more than two per cent across the motor and home portfolios, with retention levels remaining high. More than 100,000 direct customers were added across Australia and New Zealand.

However, Hawkins said the deteriorating inflationary environment in the half year impacted the DIA business, resulting in a reported insurance margin of 8.9 per cent, down from 10.5 per cent in H1 FY2022.

The company’s Intermediated Insurance Australia (IIA) division recorded GWP growth of 7.8 per cent (H1 FY2022: 8.9 per cent) and an insurance profit of $49 million (H1 FY2022: $4 million loss). The underlying insurance margin also improved to 5.7 per cent (H1 FY2022: five per cent).

According to Hawkins, IIA continued to build the momentum needed to achieve its $250 million profit ambition in FY2024. Benefits from a number of initiatives were realised, such as embedding a simplified operating model and upgraded pricing and underwriting capability.

Hawkins forecast FY2023 GWP growth to be around 10 per cent, an increase from the previous guidance of mid- to high-single digit growth.

“We expect our FY2023 reported insurance margin to be around 10 per cent compared to our previous range of 14 per cent to 16 per cent. This is largely due to the expected higher natural perils costs from the Auckland flood event,” he said.

“Despite the challenges from the high inflation and perils experience impacting our business in the half, I believe we have a sound basis for confidence as we move into the second half.”