IAG’s FY 2023 financial report reveals net profit after tax rose 140 per cent to $832 million, a result that benefitted from a post-tax business interruption provision release of $392 million. Insurance profit jumped 37 per cent to $803 million.
Reported insurance margin was 9.6 per cent, up from 7.4 per cent in FY 2022, while underlying insurance margin was 12.6 per cent, down from 14.6 per cent last year. Gross written premium increased 10.6 per cent to $14.7 billion while total claims paid were around $10.2 billion, an increase of 20 per cent.
“FY 2023 was a solid year for IAG, reflecting the positive momentum in our core businesses and the significant progress we’ve made to create a stronger and more resilient company,” said Nick Hawkins, Managing Director and CEO of IAG.
“Our gross written premium (GWP) growth is above 10 per cent for the year. We maintained our group operating costs in line with our target of $2.5 billion for the third year in a row, lowered our expense ratio, and improved our net profit after tax in a challenging economic environment.
According to Hawkins, the FY 2023 result was driven by steps IAG took in 2021 to reset the business with a simpler operating model and greater focus on its core business.
GWP growth was solid across the Direct Insurance Australia (DIA), Intermediated Insurance Australia (IIA), and New Zealand businesses. DIA’s underlying insurance margin increased from 13.2 per cent in H1 2023 to 18.2 per cent in H2 2023, delivering a FY 2023 underlying insurance margin of 15.7 per cent.
While the GWP increase was largely due to premium rises across the three businesses in response to inflation pressures and higher reinsurance and natural perils costs, IAG continued to grow its customer base, while retention levels in its DIA business remained high.
Hawkins said elevated inflation in home and vehicle claims costs, as well as the higher natural perils allowance impacted IAG’s narrowed underlying insurance margin. Excluding $67 million in reinsurance reinstatement costs, the adjusted underlying margin would be 13.4 per cent.
IIA reported a higher underlying margin of 7.7 per cent (FY 2022: 5 per cent), which Hawkins said underscored “the momentum in the business”, while New Zealand’s underlying insurance margin of 13.5 per cent (FY 2022: 16.8 per cent) largely reflected higher underlying claims and reinsurance costs.
IIA finished the year with an insurance profit of $209 million (FY 2022: $103 million loss) and is on track to meet its FY 2024 insurance profit target of at least $250 million.
“As noted at our recent investor day, since the start of FY 2022 we’ve created up to $70 million of recurring savings by reducing claims and supply chain inefficiencies, and [are] continuing to extend our repair footprint,” said Hawkins.
“We now have approximately 15 per cent of vehicles going through our Repairhub network in Australia and New Zealand.”
According to Hawkins, IAG increased its FY 2024 natural perils allowance by 26 per cent to $1.147 billion, up from $909 million in FY 2023, with the company estimating that around 20 per cent of premiums collected now cover reinsurance costs and the perils allowance.