Insurance Australia Group (IAG) has released its FY22 results which show the firm is back to making a profit. The Australia and New Zealand general insurance giant reported a net profit of $347 million and gross written premium (GWP) growth of 5.7%.
The net profit of $347 million compares well to last year’s $427 million loss.
CEO Nick Hawkins said this figure reflected “the performance of the underlying core business and a $200 million pre-tax release from the business interruption provision.”
IAG reported a lower than expected insurance margin of 7.4%. According to its media release, the major reason for the lower margin was higher natural perils costs of $1,119 million versus an allowance of $765 million.
“Our FY22 financial results reflect the quality of our underlying business as we build a stronger and more resilient IAG,” said Hawkins. “We had strong GWP growth and the performance of our business was steady despite the challenging external environment.”
The GWP growth of 5.7% compared to 3.8% in FY21. Hawkins credited this growth to rate increases to offset inflationary pressures in the supply chain and natural perils and said retention rates improved over the year.
IAG’s direct insurance business grew by 4.6% with an underlying margin of 20.5%.
The firm’s intermediated insurance business in Australia reported GWP growth at 6.0% (FY21:5.6%) while its underlying insurance margin was 5.0% (FY21: 3.9%).
“Our New Zealand business performed well with 7.0% NZ currency GWP growth (FY21: 2.8%) reflecting growth across its commercial insurance and direct brands with a volume increase in commercial motor,” said Hawkins.
The CEO said climate change and its impact on customers and communities is one of the most important challenges IAG faces.
“FY22 was one of the most significant peril years we have experienced, with multiple events in Australia and New Zealand, including the February 22 floods in northern New South Wales and along the east coast.”
The IAG release said claims relating to extreme weather events more than doubled across Australia and New Zealand compared to FY21.
“To deal with the increasing severity and frequency of extreme weather events, we have put in place our largest to date perils allowance, increasing it by 19% to $909 million for FY23,” said Hawkins.