The Insurance Australia Group Ltd (ASX: IAG) share price is down 2% after releasing its FY24 report to the ASX.
IAG is one of Australia’s biggest insurance businesses, with a number of well-known brands including NRMA, CGU, WFI, Swann Insurance, AMI, Lumley and more.
IAG FY24 result
- Gross written premiums (GWP) increased by 11.3% to $16.4 billion
- Net earned premiums grew by 11% to $9.2 billion
- Insurance profit jumped 79% to $1.44 billion
- Investment income on shareholder funds up 35% to $286 million
- Net profit after tax (NPAT) climbed by 7.9% to $898 million
- Final dividend increased by 89% to $0.17 per share
- Full-year dividend increased by 80% to $0.27 per share
The insurance company said the result was driven by the strength of its business, operational improvements and customer advocacy and retention. IAG said its customer renewal rate was around 90%.
IAG noted it had established long-term reinsurance protections to reduce the impact of natural perils, help stabilise costs for customers, and reduce earnings volatility. It also revealed it has signed an agreement to source the equivalent of 100% renewable energy for IAG sites in Australia from January 2025.
Management commentary
The IAG Managing Director and CEO Nick Hawkins said:
We enter FY25 with a clear strategy and a strong and scalable business model as we focus on the next phase of growth.
Having streamlined our operations in recent years, we are now focused on building on our strong customer relationships with our leading brands and products and enhancing our retail business –enabled by our integrated Enterprise Platform.
We’ll continue to invest in the Commercial Enablement platform for our broker network and optimise our capital structure.
Our advocacy efforts to encourage government investment in resilience and for improved land use planning to help our customers, will remain a key focus.
Outlook for the IAG share price
The business is expecting mid-to-high single digit GWP growth in FY25, this assumes premium increases to cover ongoing claims inflation. The reported insurance profit of between $1.4 billion to $1.6 billion equates to a reported insurance margin of 13.5% to 15.5% and assumes continued momentum in the underlying performance.
IAG gave some comments about the FY25 underlying insurance margin drivers. It’s expecting net earned premium growth, amid rate increases and a higher reinsurance expense.
It’s expecting stable claims inflation, strong investment income and a perils allowance of $1.28 billion (up 17% year over year) with “strong downside risk protection”.
The IAG share price has risen around 25% in the last year, so the market has been expecting this sort of growth.
It has been a good time to own IAG shares, but I wouldn’t buy now with the market aware of the positive story. I think there are other ASX dividend shares that are better buys.
