Insurance Australia Group has booked a 24 per cent jump in profit thanks to a significant increase in insurance premiums and has revealed plans to review its Asian arm, saying it is considering “all options”.
IAG reported a net profit of $551 million in the six months to December 31, up from $446 million a year ago, helped by a more than 30 per cent lift in profit from insurance to $743 million.
A better than 30 per cent gain in investment income profit to $138 million also drove the result.
The insurer’s revenue grew 1.1 per cent to $8.3 billion for the half year, with a 0.6 per cent growth in the value of its gross written premium (GWP).
IAG said headline margins in its insurance business improved to 17.3 per cent, from 13.5 per cent previously, due in part to lower claims costs for natural disasters.
The company also said margins improved in its motor insurance and commercial insurance divisions courtesy of higher premiums and a steadying in the NSW Compulsory Third Party insurance business, following a downturn when the scheme was overhauled in late 2017.
IAG said the 2.3 per cent growth in the value of GWP for its consumer business – which includes motor and home insurance – was predominantly driven by increases in premiums charged.
Motor GWP increased 4.9 per cent, with IAG saying the rise in premium rates was largely in response to higher claims.
IAG shares gained 23 cents, or 3.2 per cent, to a record high of $7.50.
The company also confirmed a strategic review of its Asian division, which could result in IAG selling off the businesses, after saying opportunities are “limited” in the market.
In October, IAG said it is putting its Asian growth strategy on hold to focus on its Australian and New Zealand markets after a fruitless 18 month search for investment opportunities.
Chief executive Peter Harmer on Wednesday said IAG’s Asian division had made an increased contribution in recent months but said “all options” are now on the table.
The company has further increased its reported margin guidance, after adjusting its range in December, and now expects its reported margin to be between 15.5 per cent and 17.5 per cent.
IAG LIFTED BY INSURANCE PROFIT:
* Half year net profit up 23.5pct to $551m
* Revenue up 1.1pct to $8.3b
* Fully franked interim dividend up 1 cent to 14 cents