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Insurance Australia Group Ltd (ASX:IAG) has seen its share price decline by 2% following the release of its FY24 financial results. IAG, a major player in the Australian insurance market, owns well-known brands such as NRMA, CGU, WFI, Swann Insurance, AMI, and Lumley.
Key Highlights from FY24
- 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 attributed its strong performance to its robust business model, operational improvements, and a high customer renewal rate of approximately 90%. Additionally, IAG has secured long-term reinsurance protections to mitigate the impact of natural perils and stabilize costs for customers, alongside a commitment to sourcing 100% renewable energy for its Australian sites from January 2025.
Management Insights
IAG Managing Director and CEO, Nick Hawkins, commented on the company's position:
“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.”
Hawkins also highlighted the ongoing investment in the Commercial Enablement platform for brokers and efforts to optimize the capital structure. Advocacy for government investment in resilience and improved land use planning will continue to be a key focus.
Outlook for FY25
Looking ahead, IAG expects mid-to-high single-digit growth in GWP for FY25. This growth assumes premium increases to address ongoing claims inflation. The company anticipates an insurance profit between $1.4 billion and $1.6 billion, with an insurance margin ranging from 13.5% to 15.5%. Key drivers for FY25 include net earned premium growth, rate increases, and a higher reinsurance expense. Claims inflation is expected to remain stable, supported by strong investment income and a perils allowance of $1.28 billion, marking a 17% increase year over year.
Despite a 25% rise in IAG’s share price over the past year, the market seems to have fully anticipated this positive performance. Consequently, while IAG shares have performed well, the current market environment might lead investors to consider other dividend opportunities.
