Insurance Australia Group’s (ASX: IAG) NPAT dips by 13% in recent half, share price falls

2 min read | February 15, 2024 07:58 PM EST | By Team Kalkine Media

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Insurance Australia Group’s (ASX: IAG) NPAT dips by 13% in recent half, share price falls — Image source: Pexels

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On Friday morning, the share price of Insurance Australia Group Ltd (ASX: IAG) is experiencing a decline. At the time of writing, the company's shares have dropped by 6% to AU$5.96, following the release of its half-year results.

Key financial highlights

Gross written premium (GWP) increased by 12.5% to AU$7,947 million.
Insurance profit showed a substantial growth of 75.4% to AU$614 million.
Net profit after tax declined by 13% to AU$407 million.
Interim dividend increased by 67% to 10 cents per share.
AU$200 million on-market share buyback was announced.
Guidance for FY 2024 has been reaffirmed.

During the first six months ending on December 31, IAG reported a robust 12.5% increase in GWP, driven by premium hikes across Direct Insurance Australia, Intermediated Insurance Australia, and the New Zealand business. This was in response to inflation pressures, higher perils, and reinsurance costs. Lower volumes from the Intermediated Insurance Australia business were offset by a focus on improved underwriting and pricing.

The reported insurance profit for the half was AU$614 million, marking a significant increase of 75.4% year on year. This resulted in a reported insurance margin of 13.7%, up from 8.5% the previous year. The net profit after tax declined by 13% to AU$407 million, attributed to a prior corresponding period benefitting from a AU$360 million pre-tax business interruption claim provision release.

Despite the profit decline, the IAG board increased the interim dividend by 67% to 10 cents per share, and the company announced an on-market share buyback of up to AU$200 million, thanks to its strong capital position.

However, the market response indicates that the results may have fallen slightly short of expectations, leading to the decline in the IAG share price. According to Goldman Sachs, IAG missed on some key metrics, including insurance profits and cash earnings, compared to their estimates.

CEO commentary

IAG's CEO, Nick Hawkins, expressed satisfaction with the half-year results, emphasizing progress against strategic priorities and positive performance in direct insurance and the intermediated business. Hawkins assured that IAG is on track to deliver its guidance for FY 2024, including GWP growth in the "low double digits" and a reported insurance margin of 13.5% to 15.5%.

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