IAG takes the pain with $261 million loss
IAG has revealed few surprises in reporting a full-year loss of $261 million, which includes nearly $400 million of restructuring and impairment charges.
Results were in line with IAG’s forecast in July, when new CEO Mike Wilkins announced a major restructuring program.
The $261 million loss follows a $552 million profit last year, reflecting the fact that IAG has had a tough year of severe weather claims, poor investment results and intense competition.
“This is a poor result,” Mr Wilkins said. “While we have been affected by the increasing frequency of natural perils, widening credit spreads and soft cycles in key markets, we have acknowledged the need to do better.”
IAG reported an insurance margin of 6.1%, against 11.4% last year. Profit from insurance was down 42% to $448 million, against $767 million last year.
The IAG combined ratio reflects marginal underwriting profitability at 99.8%, compared to 94% last year.
Claims from natural perils increased 22% to $502 million, while IAG absorbed a $122 million effect of widening credit spreads.
CGU reported a 1.8% decline in gross written premium as the business elected not to renew business where pricing is inadequate, while IAG NZ recorded an insurance loss of $NZ17 million ($14 million).
IAG underwriting profit was just $16 million, against $407 million last year.
On a positive note the group increased overall gross written premium by 5.6% to around $7.8 billion. Mr Wilkins says he expects a brighter future now the company has booked the cost of corporate restructuring ($60 million) and UK asset writedowns ($350 million).
He says the insurer is making “good progress” in negotiations with potential buyers of its UK business units, which his predecessor, Mike Hawker, bought with much fanfare over the past few years.
Mr Wilkins expects IAG to benefit from “improved discipline and focus”.
“In both Australia and New Zealand rate increases are being implemented in line with rising claims costs and frequency, while in commercial insurance we have ceded volume to maintain price discipline,” Mr Wilkins said.
The group expects gross written premium growth of between 0-2% in the coming year, with an insurance margin above 10%.
Results were in line with IAG’s forecast in July, when new CEO Mike Wilkins announced a major restructuring program.
The $261 million loss follows a $552 million profit last year, reflecting the fact that IAG has had a tough year of severe weather claims, poor investment results and intense competition.
“This is a poor result,” Mr Wilkins said. “While we have been affected by the increasing frequency of natural perils, widening credit spreads and soft cycles in key markets, we have acknowledged the need to do better.”
IAG reported an insurance margin of 6.1%, against 11.4% last year. Profit from insurance was down 42% to $448 million, against $767 million last year.
The IAG combined ratio reflects marginal underwriting profitability at 99.8%, compared to 94% last year.
Claims from natural perils increased 22% to $502 million, while IAG absorbed a $122 million effect of widening credit spreads.
CGU reported a 1.8% decline in gross written premium as the business elected not to renew business where pricing is inadequate, while IAG NZ recorded an insurance loss of $NZ17 million ($14 million).
IAG underwriting profit was just $16 million, against $407 million last year.
On a positive note the group increased overall gross written premium by 5.6% to around $7.8 billion. Mr Wilkins says he expects a brighter future now the company has booked the cost of corporate restructuring ($60 million) and UK asset writedowns ($350 million).
He says the insurer is making “good progress” in negotiations with potential buyers of its UK business units, which his predecessor, Mike Hawker, bought with much fanfare over the past few years.
Mr Wilkins expects IAG to benefit from “improved discipline and focus”.
“In both Australia and New Zealand rate increases are being implemented in line with rising claims costs and frequency, while in commercial insurance we have ceded volume to maintain price discipline,” Mr Wilkins said.
The group expects gross written premium growth of between 0-2% in the coming year, with an insurance margin above 10%.