Insurance Australia Group, Australasia’s largest general insurer, returned to profit in the six months to December but trimmed its dividend by a cent to 6 cents per share as the company tried to reward shareholders while coping with lower earnings and insurance margin from around 20 storms and natural disasters (events, as insurers call them) in the half.
The headline profit was a major swing from the $460 million loss posted for the December, 2020 half year as the group grappled with accepting liability for business interruption claims related to COVID-19.
The insurer reported a net profit of $173 million for the half-year despite being hit by a blowout in natural perils claims (As was rival Suncorp in its half year report earlier this week).
IAG’s reported higher-than-expected natural perils claims of $681 million for the half, $299 million above the allowance provided.
Reflecting that, the company’s insurance margin (a key profit margin) tumbled to 7.1% from more than 17% in the December, 2020 half before the provision for Covid related losses in that period. On an underlying basis the insurance margin looked better, dipping from 15.9% a year ago to 15.1%.
But the insurance profit still fell – to $2822 million in the latest half from $667 million a year ago, a sign of the damage the higher weather-related claims had on the business.
The most costly events included New Zealand flooding, the small Melbourne/southern Victorian earthquake and South Australian hail storms between August and October last year.
Offsetting those extra claims was a 6.5% rise in gross written premiums, (GWP, the core revenue source for an insurer) to $6.5 billion after lifting premiums and growing volumes.
IAG CEO Nick Hawkins said the rise in GWP increase was “primarily rate driven” but added the group’s plans to sign up 1 million new customers over the next five years was “delivering encouraging progress”.
“We’ve expanded into new regions while targeting new customer segments in our core insurance markets in Australia and New Zealand, and we’re improving customer experiences, especially across our digital channels,” Mr Hawkins said in Friday’s statement.
“During the half we took NRMA Insurance – one of Australia’s most trusted brands – national.”
Mr Hawkins said the extreme weather affected thousands of IAG’s customers and the team navigated COVID-19 protocols to assist affected customers lodge claims.
