Australia's biggest insurer, Insurance Australia Group (IAG), yesterday announced that the underlying margin in its insurance business increased to 14.1% for the year ended 30 June 2018 (FY2018) compared to 12.4% in FY2017.
While this lifted insurance profits by 10.8% to A$1,407m for FY2018, profits after tax dipped by 0.6% to A923m ($669m) as the higher insurance margin was offset by a fall in investment income and a higher tax bill.
Commenting on the financial performance, IAG managing director Mr Peter Harmer said in a statement, “This is a solid result for IAG with an encouraging improved underlying performance, in line with our expectations.
“We’ve met the guidance we provided last year, slightly exceeding the reported margin component thanks to favourable natural perils and higher reserve releases than anticipated.”
Mr Harmer said, “GWP growth of 1.8% met our forecast of low single digit growth, with like-for-like growth exceeding 4% after allowance for discontinued activities, NSW CTP reform impacts and foreign exchange translation effects.”
The company's Australian Consumer division, home and motor insurance, had a strong year, Mr Harmer said, due to IAG lifting rates to compensate for an increase in claims.
"There was a modest improvement from Australia Business and a continued strong performance from New Zealand," he said.
IAG has progressed its strategic review to assess options for its Asian businesses, with the company announcing in June sale agreements for its operations in Thailand, Indonesia and Vietnam. An after-tax profit of at least A$200m is expected to be identified in IAG’s FY2019 results from the combined transactions, after allowance for related costs and foreign currency translation reserve effects.
GWP rose by 1.8% to A$11.65bn in FY2018 while total revenue increased by 2.6% to A$16.41bn. IAG forecasts that GWP will grow by 2-4% and insurance margins of 16-18% in FY2019.