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Insurance Australia Group Limited (ASX:IAG) has released its half-year report for the period ended 31 December 2018. The Gross written premium (GWP) of the group increased by 4.1% to $5,881 million in 1H FY19 which consists of 3.4% growth in Australia to $4,606 Mn and 6.6% growth in New Zealand to $1,268 Mn, aided by a favourable foreign exchange translation effect of over 100bps. Following this news, the share price of the company increased by 4.658% as on 6 January 2019.
The growth in the Gross written premium (GWP) was largely rate-driven, with premium rate increases at least matching claim inflation pressures. The overall volumes were relatively flat; however, growth was achieved in short tail motor, NSW CTP and workersâ compensation. The companyâs underlying insurance margin increased to 16.2%, compared to 15.4% in 2H18. A more substantial increase against 1H18 (13.0%) included approximately 250bps of uplift from the 12.5% quota share agreements which commenced on 1 January 2018.
The Groupâs Australian Division accounted for 78% of Group GWP with a lower reported insurance margin of 10.7% (31 December 2017: 18.8%) after adverse peril and credit spread movements, and reduced reserve releases. However, Australiaâs underlying performance remained sound, with an underlying insurance margin of 14.8%.
The New Zealand Division accounted for 22% of Group GWP and produced a higher reported insurance margin of 24.9% (31 December 2017: 14.2%) and a higher underlying insurance margin of 20.0% (31 December 2017: 17.4%).
The group reported an insurance margin of 13.7 percent which was lower than the insurance margin of 17.9 percent in the prior corresponding half year. The decrease is the insurance margin is mainly due to the net natural peril claim cost outcome, which was $110 Mn above the related allowance mainly driven by the recent Sydney hailstorm incident.
The group has reported revenues of $8,581 million in H1 FY19 which is 6.7 % higher than the previous corresponding period. The company has reported a Net profit after tax of $500 million which is 9.3% lower than 1H18. Further, the pre-tax insurance profit decreased by 33% as compared to the previous corresponding period. Further, the group reported a 33% decrease in pre-tax insurance profit to $496 Mn (31 December 2017: $745 Mn), with adverse peril, reserve release and credit spread movements, totaling $262 Mn.
The net cash inflows from operating activities for the half year ended 31 December 2018 were $365 million compared with $23 million for the prior corresponding half year. The Board has declared an interim fully franked dividend of 12.0 cents per ordinary share (1H18: 14.0cps). This equates to a cash payout ratio of nearly 87 percent. The record date for the interim Dividend is 13 February 2019 and the Payment date is 20 March 2019.
In the last six months, the share price of the company decreased by 8.36% as on 5 February 2019. IAGâs shares traded at $7.640 with a market capitalization of circa $16.87 billion as on 6 February 2019 (AEST 1:39 PM).
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