AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Highlights
- IAG shares dip 2% due to ex-dividend day, losing the 1H FY25 dividend.
- Net profit after tax surges 91% to AUD778 million, driven by strong premiums and investments.
- Interim dividend of 12 cents per share declared, marking a 20% increase from last year.
Shares of Insurance Australia Group Ltd (ASX:IAG) fell by 2% to an intraday low of AUD7.44 on Tuesday, a slight dip which aligns with a common market occurrence—ex-dividend day. On ex-dividend days, stocks typically lose the value of the upcoming dividend payment as they trade without the attached dividend. For IAG, this means that from today, its shares no longer include the 1H FY25 interim dividend of 12 cents per share, reducing their value for new investors.
Despite the drop, IAG’s results for the half-year ended December 31, 2024, were impressive. The insurer revealed a massive 91% surge in its net profit after tax (NPAT), which reached AUD778 million. This outstanding performance was fueled by strong growth in gross written premiums (GWP) and solid returns from its investment portfolio. GWP rose by 6% to AUD8.43 billion, while net earned premiums climbed by nearly 10% to AUD4.93 billion, reflecting increased demand for IAG's offerings.
IAG’s pre-tax insurance profit saw a substantial 56% increase, reaching AUD957 million, with a reported insurance margin of 19.4%. The insurer also benefitted from favorable weather conditions, which contributed to its AUD215 million savings from the natural perils allowance. These factors, along with a AUD140 million post-tax release from the COVID Business Interruption provision, played a key role in boosting IAG’s bottom line.
Despite the strong performance, IAG did highlight a slight adjustment to its full-year forecast. While the company expects its FY25 reported insurance profit to range between AUD1.4 billion and AUD1.6 billion, it has adjusted its gross written premium (GWP) growth expectations to the lower end of the mid-to-high single-digit range. This revision is partially due to a reduction in reinsurance costs, which has allowed IAG to pass on savings to customers in the form of lower premiums.
IAG’s interim dividend, which will be paid on March 7, 2025, is 20% higher than the previous year's interim dividend, signaling a strong commitment to returning value to shareholders. For investors looking to reinvest dividends, the company has set the deadline for the Dividend Reinvestment Plan (DRP) election to 5 PM AEST on Thursday.
The broader context behind IAG’s dip can also be linked to ongoing concerns over rising insurance premiums in Australia. Federal Opposition Leader Peter Dutton recently called out the insurance sector for escalating premiums, particularly impacting homeowners and small businesses. Dutton has vowed to address the issue if elected, stressing the need for insurers to reduce premiums.
Although IAG’s recent financial performance has been strong, the dip in share price due to ex-dividend trading presents an opportunity for investors to assess whether the company’s stock is priced attractively. With the solid earnings boost and strategic focus on improving premiums and margins, IAG remains a key player in Australia’s insurance market, but external pressures, such as the rising cost of premiums, may pose challenges moving forward.
The full-year outlook for IAG remains positive, but shareholders will want to keep an eye on how the company manages reinsurance costs and responds to the political pressure surrounding premiums in the coming months.
