PREMIUM HIKES SET SCENE FOR BLUE SKIES
INSURANCE Australia Group’s plan to continue hiking premiums pleased investors, with the company’s shares rallying almost 4.5 per cent.
The insurer kept its interim dividend unchanged at 6c per share on the back of a crunch in returns as its underlying insurance margin fell on the back of natural disaster claims.
IAG had flagged earnings expectations to shareholders in recent weeks, after storms
lashed New Zealand’s North Island, triggering a raft of claims for damage across Auckland. The company has warned the floods would trigger a $236m hit to its natural catastrophe budget. Any damage done by Cyclone Gabrielle in New Zealand could also test this budget.
The insurer’s first half results were pinched by $70m in excess net natural perils claims, as well as a further $48m in reserves locked up by IAG to cover prior period claims. But IAG, which boasts brands including NRMA, CGU, and Swann Insurance, evened returns after unwinding $252m in pandemic provisions.
IAG’s gross written premium, the measure used by insurers to measure their total business, was up 7.5 per cent in the first half to $7.1bn. Net profit rose 170.5 per cent to $468m.
IAG has been jacking up premiums across its book in a bid to recoup the costs from the rising tide of inflation.
This looks set to continue, with IAG flagging plans for gross written premium growth of “around 10 per cent” in the second half of the year.
IAG reported 2.3 per cent volume growth in the period, adding more than 100,000 direct customers across Australia and New Zealand. Its underlying insurance margin fell to 10.7 per cent, from 15.1 per cent.
IAG chief executive Nick Hawkins said the insurer was “in good shape”.
IAG shares rose 4.5 per cent to $4.92, making it the ASX 200’s best performer.