Natural Perils Cost Drop Lifts IAG’s FY25 Profit—but Risks Remain
IAG has revised its FY25 financial guidance upward, citing a $200 million reduction in expected natural perils costs, including significant claims from recent NSW floods. This update lifts profit and margin forecasts amid steady premium growth.
- Natural perils cost estimate lowered by $200 million to $1.08 billion
- NSW floods contribute approximately $400 million to natural perils costs
- Reported insurance profit guidance raised to $1.6–$1.8 billion
- Insurance margin guidance increased to top end of 15.5%–17.5% range
- Gross Written Premium growth expected between 4% and 4.5%
IAG Revises Natural Perils Cost Estimates
Insurance Australia Group (IAG) has updated its financial outlook for the fiscal year ending June 2025, announcing a significant reduction in its natural perils cost estimate. The insurer now expects these costs to total approximately $1.08 billion, down by around $200 million from previous guidance. This revision includes an estimated $400 million in claims related to the severe flooding events that impacted the NSW North Coast and Mid Coast Hunter regions in May.
Impact on Profit and Margin Guidance
As a result of the lower natural perils costs, IAG has raised its reported insurance profit guidance to a range of $1.6 billion to $1.8 billion, up from the prior range of $1.4 billion to $1.6 billion. Correspondingly, the company’s reported insurance margin guidance has been adjusted upward to the top end of a 15.5% to 17.5% range, compared to the earlier 13.5% to 15.5% range. This improvement signals stronger profitability expectations for the year, reflecting the favourable claims experience.
Premium Growth and Market Conditions
IAG also provided an update on its Gross Written Premium (GWP) growth, which is now expected to be between 4% and 4.5% for FY25. This includes the impact of multi-year workers’ compensation premiums and currency effects. Retail Insurance Australia, a key segment for IAG, is showing robust growth of around 8%, driven by positive customer momentum in home and motor insurance. However, the New Zealand market is experiencing softer conditions, with GWP growth expected to be broadly flat in local currency terms.
Looking Ahead to Final Results
The updated guidance is subject to final audit and board approval, with IAG scheduled to release its full FY25 results on August 13, 2025. Investors will be watching closely for how the final numbers align with this updated outlook, particularly in relation to ongoing claims development from the NSW floods and premium growth trends in both Australia and New Zealand.
Bottom Line?
IAG’s improved profit outlook underscores resilience amid natural disasters, but final results will confirm if this momentum holds.
Questions in the middle?
- Will ongoing claims from NSW floods alter the final natural perils cost?
- How will New Zealand’s softer market conditions affect IAG’s overall growth?
- Can IAG sustain premium growth momentum in Retail Insurance Australia?
