IAG has affirmed its full-year earnings guidance despite ongoing inflation pressures and a reinsurance cost impact following the natural disasters in New Zealand. 

CEO Nick Hawkins says it’s likely the first half underlying margin will be around the lower end of the guidance range, but it expects a stronger second half as pricing benefits flow through. 

The insurer expects to achieve previously provided fiscal year guidance for “low double digit” gross written premium growth and a reported insurance margin in the range of 13.5-15.5%.

“Our confidence in the strength of our underlying business is reflected in our financial guidance,” Mr Hawkins told the annual general meeting last week. 

Inflationary trends continue to be elevated across the business, particularly in motor claims costs, likely resulting in some prior period development in the first half result, he says, while New Zealand events in late January and February have led to an additional reinsurance reinstatement cost of around $70 million. 

Natural perils costs for the current financial year to the end of September have been about $120 million, which includes $47 million in additional claims from the previous year, marking a relatively benign start to the financial year. 

“We are seeing positive financial signs,” Mr Hawkins said. “We have improved our underlying performance, retention rates remain very strong, we’re growing customer numbers and we have continued to invest in our business and in our people.” 

Chairman Tom Pockett said the last two years included the highest levels of peril events in Australia and New Zealand since the 2010 and 2011 earthquakes, and the insurer has dealt with more than 377,000 claims related to the events. 

The drivers of premium increases, around inflation, supply shortages and reinsurance repricing, had happened “very quickly” and required the company to respond, while balancing the needs of customers and shareholders, he said. 

“We are very conscious of not over-shooting the mark,” he said. “We are ensuring that we don’t increase prices too far, but still get a return to shareholders. It is that balance.”