Australian insurer IAG has reported that Gross Written Premium (GWP) increased 10.6% to $14.7bn in its 2023 full year results, while insurance profit rose 37% to $803m.
IAG noted that while the GWP increase was primarily due to premium rises in response to inflation pressures and higher reinsurance and natural perils costs, the firm continued to grow its customer base, while retention levels in its Direct Insurance Australia (DIA) business remained high.
IAG’s reported insurance margin in 2023 was 9.6%, up from 7.4%, last year.
The firm attributed the improvement to credit spread gains and lower prior year reserve strengthening. As mentioned, the Australian insurer’s insurance profit rose 37% to $803m, up from $586m in 2022.
Citing elevated inflation in home and motor claims costs, as well as the higher natural perils allowance, IAG said its underlying insurance margin narrowed to 12.6%. Excluding $67m in reinsurance reinstatement costs, the adjusted underlying margin would be 13.4%.
Meanwhile, the firm’s net profit after tax increased to $832m, up substantially from $347m last year. IAG said this figure benefited from a post-tax business interruption provision release of $392m.
“It came in a year where we paid around $10.2b in claims to support our customers, up approximately 20% on full year 2o22,” the firm explained.
IAG also reported that GWP growth was solid across its DIA, Intermediated Insurance Australia (IIA) and New Zealand businesses.
DIA’s underlying insurance margin increased from 13.2% in the first half of 2023 to 18.2% in the second half to deliver a full year 2023 underlying insurance margin of 15.7%.
The firm added that it was “also pleased” with the 38% reduction in outstanding home claims achieved this year.
IIA also reported a higher underlying margin of 7.7%, “underscoring the momentum” in the business. New Zealand’s underlying insurance margin of 13.5%, down from 16.8.% last year, largely reflected higher underlying claims and reinsurance costs, according to the firm.
Looking forward, IAG has increased its full year 2024 natural perils allowance by 26% to $1.147b, up from $909m this year.
“We estimate around 20% of premiums we collect now cover reinsurance costs and the perils allowance,” the firm said.
Nick Hawkins, IAG Managing Director and CEO, commented, “We enter FY24 with positive momentum across the company and confidence that the strategy we have in place will deliver long-term benefits for our shareholders and the 8.7m customers we serve.”
