IAG’s net profit rose 7.9% to $898 million last year as gross written premium increased 11.3% and the intermediated business achieved a long-term earnings target.

The insurance profit surged 79.1% to $1.438 billion, with GWP rising to $16.4 billion and investment income providing a tailwind. 

“This is a positive result for the organisation. It’s a reflection of a lot of the good work that’s occurred over the past couple of years and it really gives us a platform to build on,” intermediated head Jarrod Hill told insuranceNEWS.com.au.

Direct Insurance Australia earnings rose 19% to $654 million, with GWP up 12.8% following rate increases to address claims inflation and increased natural peril and reinsurance costs.

Intermediated Insurance Australia profit grew 57% to $328 million, surpassing the $250 million target set about three years ago when the business was loss-making. GWP increased 6.4%, with the underlying insurance margin benefiting from earned premium growth, a lower underlying loss ratio and higher investment income.

IAG has applied to the Australian Prudential Regulation Authority for a separate financial services licence for the intermediated business, as it looks to build on the performance improvement.

CEO Nick Hawkins told a results briefing the direct and intermediated divisions were distinct from each other in areas including products, the market cycle and technology, and having separate licences would make sense.

“That doesn’t change the overall group,” he said. “It’s really making sure we’re really getting focus on these discrete parts of the company, discrete customer segments and enabling each of the leaders around that to run their businesses.”

Mr Hawkins was asked by an analyst about the GWP impact of IAG exiting an insurance arrangement with Coles from next month.

“We found it pretty tough, that business, to make money out of, and so for various reasons we’re no longer part of that arrangement,” he said. The business represented only “a couple of hundred million” in premium within a company collecting about $16 billion, he said.

New Zealand insurance profit surged to $457 million from $44 million the previous year, which included the Auckland floods and Cyclone Gabrielle, with IAG also presenting the country’s results on a retail and intermediated basis.

Retail GWP rose 18.6% to more than $2 billion and reported insurance profit grew to $247 million from $45 million. Intermediated GWP rose 12.2% to more than $1.7 billion, and profit of $210 million was up from a small loss the previous year.

IAG says in retail lines, motor repair costs are moderating but double-digit inflation is still being seen on the property side, driven by labour and building supply costs.

Mr Hill, who took up leadership of the intermediated division in September 2021, tasked with improving performance, says the commercial market overall is moderating, but with differences across segments.

Some increased competition has been seen from the London market and new underwriting agencies.

“We haven’t seen a huge influx of insurers coming into the market,” he said. “What we are seeing, though, is the incumbent market appetite has expanded, and that’s provided additional capacity.”

IAG’s net perils costs were $983 million, which was $115 million below the $1.098 billion allowance. This year the allowance rises to $1.283 billion, with costs capped at that level under 90% of modelled scenarios as a result of reinsurance arrangements outlined at the end of June. 

IAG expects GWP growth will be in the “mid to high single digit” range this year and reported insurance profit will reach $1.4-$1.6 billion.

The company says its capital position at June 30 was “well above” its targets and it will complete an on-market share buyback of up to $350 million.

From Insurance News magazine: As competition and capacity pick up, is the industry cycling back towards a soft market?