IAG’s first-half profit jumped 91% to $778 million, lifted by a business interruption provision release and lower natural disaster costs.

Gross written premium increased 6% to $8.4 billion as inflation impacts moderated, while perils costs were $215 million below the $641 million allowance.

The insurer has now refined its guidance, expecting the full-year reported insurance margin to be towards the top of its 13.5%-15.5% range and GWP growth at the lower end of a mid to high single digit range. 

“Today’s result reflects the quality of our business as we continue to see consistent, reliable performance across our portfolios and steady progress against our strategic priorities,” CEO Nick Hawkins said. “It follows a challenging four-year period for IAG, marked by extreme weather events, volatile investment markets and covid-related issues that impacted our performance.”

A $200 million covid business interruption provision release was announced last month after the Federal Court ruled against policyholders seeking to pursue claims through a class action.

IAG’s insurance profit, excluding the business interruption benefit, rose 55.9% to $957 million, led by the Australian retail division.

Mr Hawkins says supply chain and labour cost pressures are abating, with easing inflation more pronounced in New Zealand, and the market continues to be rational.

“As a general theme, we’re not pricing below inflation anywhere,” he said when asked during a briefing about pricing pressures and margins.

Australian retail reported an insurance profit of $476 million, compared with $229 million a year earlier. GWP grew 6.1% to $4.31 billion, or 8% if adjusted for an exit from Coles insurance.

Intermediated Insurance Australia’s insurance profit fell to $171 million from $181 million, while GWP grew 10.3% to $2.23 billion.

New Zealand earnings rose to $311 million from $204 million, benefiting from perils costs being $93 million below allowance. GWP grew 1.2% to $1.89 billion, or 4.7% in underlying local currency terms.

NZI GWP grew 1% to $NZ902 million ($810 million) in a softening commercial market, direct GWP rose about 6% to $NZ868 million ($780 million), and bank partner channels GWP increased to $NZ306 million ($275 million).

Mr Hawkins says IAG is scaling up its retail Enterprise technology platform, has improved claims management capability and now has the lowest level of unresolved claims since the 2022 floods. 

“Recent storms, floods and the LA fires are a stark reminder of the need to be a well-prepared nation,” Mr Hawkins said.

“New IAG research shows the LA fires have heightened awareness and concern across Australia and New Zealand around preparing for and responding to natural disasters.”  

The research found nearly 48% of respondents are more concerned than before about their safety and protection needs, 86% are more inclined to take action and 46% are more likely to seek information on steps they can take to prepare for and respond to bushfires.

A quiet first half for perils has been followed by the monsoonal north Queensland floods and other east coast storms. January and February net perils costs are about $100 million above expectations, but the company is still ahead of allowance for the year to date. 

IAG’s reinsurance costs for the half increased by $125 million after the insurer last year boosted its program with multi-year perils cover and long-tail protections.

The Australian Competition and Consumer Commission is considering IAG’s $855 million deal to acquire 90% of RACQ Insurance and to enter a 25-year distribution deal.

The company is targeting completion in the calendar year’s third quarter.