Insurance company returns to profit

INSURANCE Australia Group is banking on further price rises and cost stability as it aims to improve profitability across the business, with the strategy already seeing the business return to profit after a string of poor results.

The listed insurer reported a 6.2 per cent lift in gross written premium, driven by higher rates and volume growth across its direct and intermediated lines in the past six months.

That helped IAG lift its underlying insurance margin on policies sold to its customers to 15.1 per cent, from 14.7 per cent in the 2021 financial year.

Customer retention, despite the price increases on insurance policies, helped IAG swing to a net profit of $173m. That compares to a $460m loss in the same period last year.

However, an ugly October of storms, and wild weather across the first half of the financial year dented IAG’S returns.

The lift in premiums comes after IAG warned of inflationary pressures in December, noting the insurer was expecting price rises in materials and wage pressure from its employees.

The lift in gross written premium compares to insurance rival Suncorp, which reported 7.5 per cent growth in the half.

IAG’S profits would have been all the sweeter if not for the $681m in natural catastrophe losses from a string of storms and wild weather that swept across Australia in October.

However, this was offset by reinsurance, leaving IAG with a $299m natural peril cost above allowance, in line with its November updates.

IAG chief executive Nick Hawkins said the insurer was planning for further wild weather events in the years ahead.

“Our view is mitigation has to be the key here,” Mr Hawkins said.

“That’s the responsibility of individuals and communities, state and federal governments and companies like ours to incentivise behaviour.”

IAG declared an interim dividend of 6 cents, with a total payout of $176m to investors.