Insurance Australia Group (IAG) reported a resilient first half of FY26 with an underlying insurance profit of $804 million and maintained its full-year guidance despite integration challenges from the RAC Insurance acquisition.
- Underlying insurance profit of $804 million with 15.1% margin
- Gross written premium up 6% to $8.93 billion, boosted by RACQI acquisition
- Reinsurance program integration delivers synergies supporting sustainable margins
- On-market share buyback announced for up to $200 million
- Strong capital position with CET1 ratio of 1.18 supports dividends and buybacks
Solid Half-Year Performance Despite One-Off Challenges
Insurance Australia Group (IAG) has delivered a robust set of results for the half year ended 31 December 2025, demonstrating resilience amid integration of its recent RAC Insurance Pty Limited (RACQI) acquisition. The company reported an underlying insurance profit of $804 million, maintaining a strong underlying insurance margin of 15.1%, in line with its through-the-cycle target of 15%. This performance underscores disciplined execution across underwriting, claims management, and expense control.
Gross written premium (GWP) rose 6% to $8.93 billion, reflecting both organic growth and the contribution of RACQI, which added approximately $500 million in just four months. This growth was supported by ongoing rate increases in personal and commercial lines in Australia and solid retail growth in New Zealand, offsetting softer conditions in some intermediated commercial markets.
Reinsurance and Capital Strength Bolster Confidence
IAG successfully integrated its reinsurance program with RACQI, delivering annualised run-rate synergies exceeding $50 million. The comprehensive reinsurance arrangements provide confidence in sustaining a 15% insurance margin and return on equity (ROE) through the cycle, despite natural peril volatility. Net perils costs, excluding RACQI, were in line with allowances, while RACQI contributed a one-off adverse impact of $152 million.
The company’s capital position remains robust, with a Common Equity Tier 1 (CET1) ratio of 1.18 at December 2025, comfortably above its target range of 0.9 to 1.1. This strong capital base supports a 12 cents per share interim dividend and an on-market share buyback program of up to $200 million, signalling management’s confidence in the outlook and commitment to shareholder returns.
Operational Highlights and Strategic Progress
Operationally, IAG’s Retail Insurance Australia segment showed positive momentum with a 4% underlying GWP growth and improved customer experience metrics, including a rise in Net Promoter Score (NPS) to 52. NRMA Insurance was recognised as Australia’s most trusted insurance brand in the 2025 Roy Morgan Trusted Brand Awards. In New Zealand, direct customer growth accelerated, supported by investments in digital platforms and streamlined product offerings.
The Intermediated Insurance Australia and New Zealand segments continued to execute disciplined underwriting strategies amid challenging commercial markets, with underlying insurance margins improving slightly. The company also highlighted ongoing investments in technology transformation, including the rollout of generative AI capabilities and integration of claims operations, aimed at enhancing efficiency and customer service.
Guidance Maintained with Cautious Optimism
Despite the one-off RACQI-related costs in the first half, IAG maintained its FY26 guidance for reported insurance profit and margin, expecting a high single-digit GWP growth for the full year. The company anticipates reported insurance margins in the range of 14% to 16%, with net natural peril costs forecast at $1.617 billion. Management emphasised the importance of disciplined underwriting and capital management to navigate ongoing market uncertainties.
Bottom Line?
IAG’s steady half-year results and strategic integration progress set the stage for disciplined growth and shareholder value in FY26.
Questions in the middle?
- How will ongoing integration of RACQI impact IAG’s margins and claims experience in the second half?
- What are the potential risks to IAG’s reinsurance program amid increasing natural peril volatility?
- How will currency fluctuations, particularly the weaker New Zealand dollar, affect future earnings?