Insurance Australia Group Ltd (ASX: IAG) has released its FY19 result to the market, but its share price is down over 4%, here’s why,
Insurance Australia Group is Australia’s largest insurance business, its direct heritage dates back to 1920. Its businesses underwrite over $11.4 billion of premium per annum, selling insurance under many brands, including: NRMA Insurance, CGU, SGIO, SGIC, Swann Insurance and WFI (Australia); and NZI, State, AMI and Lumley Insurance (New Zealand).
Insurance Australia Group’s FY19 Result
IAG said that its gross written premium (GWP) increased by 3.1% to $12 billion, however the insurance profit declined by 13% to $1.22 billion because the reported margin dropped by 1.4% to 16.9% due to higher costs from natural disasters and significantly lower ‘prior period reserve’ releases.
However, IAG reported that its ‘underlying’ margin improved by 2.5% to 16.6%.
However, the end result was a 10% decrease in cash earnings to $931 million. But conversely, the net profit after tax (NPAT) rose by 16.6% to $1.08 billion which included the sale of its Thailand operations for a profit of over $200 million.
Insurance Australia Group Dividend
Due to the fall in cash earnings, the IAG Board decided to cut the dividend by 5.9% to 32 cents per share. However, dividends may not be fully franked in future periods due to New Zealand earnings, a higher dividend payout ratio and other capital management initiatives such as the earlier. special dividend
This means the current FY19 fully franked dividend yield is 4.1%.
FY20 IAG Guidance
IAG is expecting gross written premium growth of low single digits with a reported insurance margin of 16% to 18%.
It also has number of underlying assumptions including net losses from natural perils of $641 million, being in line with the allowance, a reserve release of around 1% (1.7% in FY19) and no material movement in foreign exchange rates or investment markets.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.