Insurance Australia (ASX:IAG) back to making profit in FY22

• Insurance Australia Group (IAG) increases net profits by more than 181 per cent in FY22
• The company has made a profit of $347 million, up from FY21’s loss of $427 million, and also recorded a 5.7 percent increase to its gross written premium to over $13.3 billion
• IAG shareholders can expect a 45 per cent drop to the final dividend, with IAG giving 11 cents for each share compared to the 20 cents last year
• The company faced one of the most significant peril years with severe and frequent natural disasters resulting in claim lodgements more than doubling year-on-year
• To better prepare, Insurance Australia implemented its largest ever perils allowance, increasing it by 19 per cent to $909 million for FY23
• IAG shares are up 0.54 per cent to trade at $4.64 per share as of 12:45 pm AEST

Insurance Australia Group (IAG) has detailed a 181.3 per cent increase in profits for the 2022 financial year.

The company recorded a 5.7 percent increase to its gross written premium (GWP) to over $13.3 billion and a net profit of $347 million, an improvement to FY21’s loss of $427 million.

However, shareholders will see a 45 per cent drop to its dividends, with IAG giving 11 cents for each share compared to 20 cents in FY21. The 11-cent full year dividend equates to a payout ratio of around 78 per cent of reported net profit after tax.

CEO and Managing Director Nick Hawkins said IAG had strong GWP growth and the business performed steadily despite the “challenging external environment.”

The company said COVID-19 impacted its material performance in the first half of FY22, reducing GWP and increasing insurance profits. In the second half no material impact was recorded.

Investment income on shareholders funds was a loss of $105 million, mainly due to the increased rates and negative credit spends for its fixed income portfolio which was a $68 million loss.

“Our FY22 financial results reflect the quality of our underlying business as we build a stronger and more resilient IAG,” Mr Hawkins said.

Mr Hawkins said climate change and its impact to customers and communities is one of the most important challenges IAG faces as a business.

“FY22 was one of the most significant peril years we have experienced, with multiple events in Australia and New Zealand, including the February 22 floods in northern NSW and along the east coast,” he said.

“Across Australia and New Zealand, claim lodgements relating to extreme weather events in FY22, more than doubled over the prior year.”

In total, IAG recorded $1.12 billion in natural perils costs in FY22 which was $354 million above the original allowance.

In order to deal with the increasing severity and frequency of extreme weather events, the company implemented its largest ever perils allowance, increasing it by 19 per cent to $909 million for FY23.

IAG shares were up 0.54 per cent to trade at $4.64 per share as of 12:45 pm AEST.