IAG’s Net Profit Surges 91% to $778 Million, Insurance Margin Hits 19.4%

Robust Profit Growth Amid Improving Insurance Margins

Insurance Australia Group Limited (ASX: IAG) has delivered a striking half-year financial performance for the period ended 31 December 2024, with net profit after tax soaring to $778 million, up 91.2% from $407 million in the prior corresponding period. This substantial uplift was underpinned by a 55.9% increase in insurance profit to $957 million and a notable improvement in the reported insurance margin to 19.4%, compared to 13.7% a year earlier.

The company’s underlying insurance margin also strengthened to 15.1%, reflecting effective claims management, premium rate increases, and a favourable natural perils experience that was $215 million below allowance. These factors combined to reduce the immunised underlying claims ratio by 300 basis points to 52.6%, signaling improved operational efficiency and risk control.

Premium Growth and Segment Performance

Gross written premium (GWP) grew 6.0% to $8.426 billion, with strong contributions from Retail Insurance Australia (RIA) and Intermediated Insurance Australia (IIA) segments. RIA recorded 6.1% growth, driven by rate increases in motor and home insurance, while IIA achieved 10.3% growth, buoyed by commercial lines and multi-year workers’ compensation policies. New Zealand operations posted modest growth of 1.2%, supported by rate increases and volume gains in key personal lines.

Divisional insurance margins showed marked improvement, particularly in New Zealand where the reported insurance margin climbed to 28.6%, supported by a materially lower claims ratio and favourable perils experience. RIA’s margin nearly doubled to 19.0%, benefiting from premium earn-through and supply chain improvements that reduced claims inflation.

Investment Income and Capital Position

IAG’s investment income on shareholders’ funds rose to $217 million, reflecting higher returns from equities and fixed interest assets. The company maintained a conservative investment stance, with approximately 90% of total investments held in fixed interest and cash, aligning with the duration of insurance liabilities.

Capital strength remains robust, with Common Equity Tier 1 (CET1) capital at $3.652 billion and a CET1 multiple of 1.42 times the Prescribed Capital Amount (PCA), comfortably above regulatory requirements. The company’s capital management strategy includes an on-market share buy-back program, with $37 million of shares repurchased during the half.

Dividend and Strategic Outlook

Reflecting confidence in its earnings trajectory, IAG declared a 12.0 cents per share interim dividend, franked to 60%, representing a payout ratio of 45% of net profit excluding the business interruption provision release. The dividend reinvestment plan will operate on-market without a discount.

Looking ahead, IAG reaffirmed its full-year 2025 guidance, targeting a reported insurance profit between $1.4 billion and $1.6 billion and a reported insurance margin of 13.5% to 15.5%. The company anticipates mid-to-high single-digit GWP growth and expects natural peril costs to total approximately $1.283 billion for the year.

Regulatory and Legal Developments

During the half, IAG entered a significant 25-year exclusive strategic alliance with RACQ, valued at $855 million, to provide general insurance products to Queenslanders. The transaction, which includes acquiring 90% of RACQ’s insurance underwriting business, is subject to regulatory approval and expected to complete in the third quarter of 2025.

On the legal front, IAG continues to manage complex litigation related to business interruption claims and trade credit insurance exposures, including ongoing Federal Court proceedings. While these matters introduce some uncertainty, the company maintains provisions and defenses aligned with its risk management framework.