Australian insurer IAG has posted an H1 2024 gross premiums written (GWP) increase of 12.5% to $7.9 billion year over year, the strongest in the past nine years, as the firm’s insurance profit increased by 75%.
The group’s insurance profit of $614 million went up from $350 million in the prior year period, with a reported insurance margin of 13.7% from 8.5% year over year.
However, the net profit after tax was down to $407 million in H1 2024 from $468 million a year earlier.
The insurer noted the continuous impact of natural perils since late November, with large parts of Australia’s east coast being devastated by major weather events. The increased frequency and severity of natural perils, inflation, and increased reinsurance costs have flowed through to premium increases, added the insurer.
In the first half alone, IAG has settled more than $6 billion in claims compared year over year to $5.45 billion, which the firm says is around 730,000 claims across Australia and New Zealand.
Nick Hawkins, IAG Managing Director and Chief Executive Officer, stated, “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. Customer retention remained high, reflecting the strength of our brands. This was recognised in the latest Brand Finance Australia 100 2024 report, where NRMA Insurance was ranked Australia’s 2nd strongest brand.”
“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. Our first-half Gross Written Premium (GWP) growth was the strongest in nine years at 12.5% (1H23: 7.5%). The margins and underlying claims ratios in Australia and New Zealand improved, and we are on track to meet our FY24 financial guidance,” he continued.
Adding: “Our reported insurance profit of $614m (1H23: $350m), equated to a reported insurance margin of 13.7% (1H23: 8.5%). The underlying insurance margin was 13.7% (1H23: 10.7%) with credit spread and natural perils benefits, offset by some prior period short-tail strengthening. Net profit after tax (NPAT) was $407m, down 13% on 1H23 (1H23: $468m) which had the benefit of a $360m pre-tax business interruption (BI) claim provision release.
“The increase in the expense ratio to 23.7% (1H23: 22.9%) is the result of increased commissions and government levies as well as the investments we are making to support our growth strategy, such as our Enterprise Platform rollout and IIA’s Commercial Enablement technology program. The expense ratio is expected to decline in the second half of the year.
“DIA, IIA and the New Zealand business all delivered solid GWP growth and improved margins. Our first half performance demonstrates IAG is a stronger and more resilient business. We have a sound reinsurance program, and our capital position is strong. As a result, today we’ve announced an on-market share buyback of up to $200m.
“We are well positioned to continue to play our critical role as an economic shock absorber for consumers and businesses in Australia and New Zealand, helping them when they need us most, while also delivering returns for our shareholders. We’re on track to deliver the FY24 guidance we outlined at the beginning of the financial year. Our strategy is clear, and our leadership team is focused on delivering against our goals.”
