Insurer IAG romps to big profit rise but says premium growth slowing

[Pelican Press 0]

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Insurer IAG romps to big profit rise but says premium growth slowing

Australia’s biggest insurer, Insurance Australia Group, has romped to a big profit rise while insisting it is doing everything possible to moderate premium increases for customers battling cost of living pressures.

IAG, which owns brands including NRMA, CGU and WFI, said on Thursday net profit surged 91 per cent to $778 million in the first half, with its pre-tax insurance earnings racing 56 per cent higher on a near 50 per cent jump in margins.

The profit growth compared to just a 6 per cent increase in gross written premiums, down from 11.3 per cent for the 2024 financial year, as premium increases moderated with slowing inflation though they still remain above inflation.

That unnerved investors, who marked down IAG shares by as much as 10 per cent to $8.04 in early trading.

*********** insurers have hit up customers with hefty annual premium increases of up to 25 per cent over the past three years, blaming elevated labour and repair costs, increased reinsurance costs and more frequent severe weather events such as storms and bushfires.

The premium rises have swelled profits, with the companies pivoting to justifying their better returns by arguing they need to be financially strong to meet the threat posed by climate change.

IAG’s latest result was aided by the release of a $200m COVID interruption provision and favourable weather that saw its natural peril costs come in $215m under expectations.

The group is sticking with its forecast of a full-year profit of at least $1.4b, but it has softened its expectations for premium growth, which is now seen around “mid-single digit” because of easing premium increases.

“Inflation is coming down (and) … premium increases have started to moderate,” chief executive Nick Hawkins said. “A year or two ago, everything we looked (premium increases in motor and home and contents insurance) was double digits,” he said.

“That’s not the case now. Motor is now low to mid single digit increases, property is still a little more than that, mid to high single digits.”

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