IAG says it expects motor and home premiums to continue rising despite the company announcing an expected net profit after tax of $347 million in its preliminary financial results report for financial year 2022 (FY2022). After posting a $427 million loss in FY2021, IAG said the financial turnaround occurred within “a challenging operating environment with a high incidence of natural perils, volatile investment markets, and a higher inflationary environment”.
The results include an expected reported insurance profit of $586 million, representing a margin of 7.4 per cent (FY2021: 13.5 per cent) compared to the guidance range of 10 per cent to 12 per cent. Gross written premium (GWP) growth is expected to be 5.7 per cent (FY2021: 3.8 per cent), which matches previous IAG guidance of ‘mid-single digit’ growth. IAG’s guidance for FY2023 includes GWP growth in the “mid-to-high single digit” range, primarily to cover claims inflation, higher reinsurance costs and an increased natural peril allowance. Modest volume growth and an increase in customer numbers are also expected.
The preliminary results, which are subject to finalisation of the audit process and board approval, are expected to include:
- An underlying insurance margin in the second half of FY2022 of 14.1 per cent (H2 2021: 13.5 per cent)
- A loss on shareholders’ funds of $105 million
- A pre-tax net corporate expense benefit of $200 million (FY2021: $1510 million loss) reflecting a reduction in the business interruption provision
Nick Hawkins, Managing Director and CEO of IAG, said the company’s direct insurance business in Australia is growing in key segments, particularly as it rolls out the NRMA Insurance brand in Western Australia and South Australia.
“As we enter FY2023, our guidance demonstrates both top-line and margin improvement,” Hawkins said. “We have been impacted by claims inflation in our key home and motor portfolios and have significantly increased our natural perils allowance to help ensure the business can withstand the impact of increasing frequency and severity of natural perils.
“In our intermediated business, the steps we’ve taken to improve the performance are showing promising signs and positions us well to deliver the targeted insurance profit of $250 million in FY2024.
“By creating a more focused operating model, a leadership team with deep expertise, and a clear strategy for growth we have confidence in the future.”
IAG will announce its final, audited FY2022 results on 12 August.