Australian insurer IAG has reported that its insurance profit totalled AUD$282 million for 1H22, compared to $667 million in the prior year period, as the firm was impacted by significant natural perils costs of $681 million.
The company reported a cost of around $200 million for events that incurred in the three-month period ending 30 September 2021, including flooding in Westport, New Zealand and the Mansfield earthquake that impacted Victoria.
This was followed by a loss of $141m for weather events across Eastern Australia in October 2021, and a further $169m attributable to the South Australian hail and Victorian windstorm event that occurred at the end of the month.
At the same time, the company experienced relatively benign natural perils costs in November and December 2021, compared to usual seasonal patterns.
Following the widespread and destructive South Australian and Victorian event, and other events that impacted the second half of October, IAG has increased its expectation for FY22 net natural perils claims costs to $1.045 billion, compared to the allowance of $765m. This FY22 estimate remains unchanged.
The insurer reports that none of the events in 1H22 were protected by its financial 2022 aggregate reinsurance cover. At 31 December 2021, the $270m (post-quota share) deductible attached to the FY22 aggregate cover had been eroded by $209m as a result of 1H22 weather events.
The much lower insurance profit equated to a lower reported insurance margin of 7.1%, compared with 17.9% in the prior year period.
Overall, the company has delivered a net profit of $173m compared to a $460m loss in 1H21.
The company noted: “There have been no further material changes to the provisions we’ve made for business interruption and customer refunds and we reiterate that we have no net insurance exposure to trade credit via BCC Trade Credit.”
Gross Written Premium (GWP) growth of 6.2% for FY22 with an underlying insurance margin improving to 15.1%, compared to 14.7% for the same prior year period.
The company noted that its GWP growth was primarily rate driven, however they also gained customer growth and strong retention across its key motor and home lines in its direct Australia business, where it grew by 3.3%.
“We are seeing a notable turnaround in our intermediated Australia business which grew GWP ~9%, reported strong retention and some new business growth, and an improving underlying margin of 5% for the same prior year period,” a spokesman for the company said.
IAG also reported their reinsurance expense is slightly higher at $2.55 billion, however it is still level with the same period last year’s at $2.48 billion.
Nick Hawkins, IAG Managing Director and Chief Executive Officer commented: “IAG delivered a solid performance in 1H22, reflecting the foundations we have put in place to create a stronger and more resilient IAG.
“We’ve reset the business with a simpler operating model, new leadership, and a clear strategy for growth which we are investing in to create long-term value for our stakeholders.”
