Shares in Insurance Australia Group fell yesterday, despite news of a doubling in dividend in 2020-21 from the previous year and a loss in line with that already signalled in earlier guidance.
The shares ended down 2.6% at $5.14, ending a strong run up after Suncorp (the owner of AAMI and other insurance brands) revealed a better-than-expected performance from its insurance business.
IAG will pay shareholders a final dividend of 13 cents per share, taking the full-year payment to 20 cents a share – that is double the 10 cents paid in the previous year which saw the company withhold its final as the Covid lockdowns hit and financial firms were encouraged by APRA to cut or drop dividends to conserve cash.
The 20 cents a share total for the year is only the same as the company paid in a final for 2018-19, so there’s been no growth in two years, taking into account Covid.
A recovery in cash earnings in the year to June allowed the dividend to be paid. They jumped 170% to $747 million. The final dividend of 13 cents per share took payout ratio to 66% based on full year cash earnings.
The loss of $427 million was warned of in July’s trading update.
It was partly driven by the increase in provision for business interruption claims, as well as customer remediation programs and exceeding the company’s budget for natural disasters.
IAG reported its gross written premium – total revenue from insurance contracts – had increased by 3.8% to $12.6 billion and insurance profits of $1.007 billion, up from $741 million last year.
That was due to lower claims from car drivers and businesses with lockdowns restricting traffic movements for months on end in Victoria and for varying times in Sydney, Adelaide and southern Queensland.
IAG CEO Nick Hawkins said the GWP growth was mostly thanks to the insurer charging its customers higher premiums, but “we also saw promising new business growth and stronger customer retention”.
The jump in insurance profit was due to lower motor vehicle claims as travel was brought to a standstill during COVID-19.
Mr Hawkins said he was confident the group could continue to support customers challenged by COVID-19, while pursuing growth by investing in technology and better risk management.
“We are optimistic about the outlook for IAG and are reintroducing guidance for [financial year 2022],” Mr Hawkins said. “COVID-19 continues to affect us all, and we were pleased to continue customer support measures we introduced in 2020.
More than 68,000 policyholders have taken up these measures which include premium reductions and deferrals,” he said.
