IAG’s financial report for the half year ended 31 December 2023 has revealed an insurance profit of $614 million, a 74 per cent increase over the $350 million recorded in the corresponding period last year. Gross Written Premium (GWP) increased 12.5 per cent to $7.9 billion (H1 FY2023: 7.5 per cent), while reported insurance margin was 13.7 (H1 FY2023: 8.5 per cent). Underlying insurance margin was also 13.7 per cent, an increase of three points over last year’s result.
However, net profit after tax was $407 million, down 13 per cent on H1 FY2023, which had the benefit of a $360 million pre-tax business interruption claim provision release. The drop in net profit, along with general concerns over inflation and increased cost of living leading to investor fears over customer retention, led IAG’s share price to fall 3.8 per cent on Friday.
The Direct Insurance Australia business showed strong GWP growth driven by Motor (14 per cent) and Home (16 per cent). Motor GWP was $1.772 billion, which was largely rate-driven with volumes broadly flat. Retention rates remained close to 90 per cent across major states. Increases in reported insurance margin to 11.9 per cent (H1 FY2023: 8.9 per cent) and underlying insurance margin to 15.9 per cent (H1 FY2023: 13.2 per cent) reflected an improvement in underlying claims ratio, assisted by improving motor claims trends such as reducing second-hand car prices and expanded network capacity.
“We’ve achieved a solid operating first half result, with our focus on strategy execution and the momentum in the underlying business continuing to drive IAG’s performance,” said Nick Hawkins, Managing Director and CEO of IAG.
“Our first half gross written premium growth was the strongest in nine years at 12.5 per cent. The margins and underlying claims ratios in Australia and New Zealand improved, and we are on track to meet our FY2024 financial guidance.
“GWP growth reflected premium increases across Direct Insurance Australia (DIA), Intermediated Insurance Australia (IIA) and the New Zealand business in response to inflation pressures, higher perils, and reinsurance costs. This was partially offset by slightly lower volumes, mainly driven by our IIA business focusing on improved underwriting and pricing.”
Hawkins said an increase in the expense ratio to 23.7 per cent (H1 FY2023: 22.9 per cent) resulted from increased commissions and government levies, in addition to investments supporting IAG’s growth strategy such as the Enterprise Platform rollout and IIA’s Commercial Enablement technology programme. The expense ratio is expected to decline in the second half of the year.
As a result of IAG’s performance and “strong” capital position, Hawkins also announced a share buyback programme of up to $200 million.