IAG doubles dividend as it aims for growth in COVID uncertainty
Insurance Australia Group has doubled its dividend even as it reported a $427 million full-year loss, with its chief executive “optimistic about the outlook” despite the uncertainty around COVID-19.
The country’s largest general insurer, which owns brands including NRMA and CGU, will pay shareholders a final dividend of 13¢ per share, taking the full-year payout to 20¢, compared to 10¢ paid last year.
The headline loss, which had already been announced last month, was driven by a combination of exceeding the group’s allowance for extreme weather claims and an increased provision for business interruption claims following the industry’s unsuccessful attempts to deny liability for claims from businesses that lost income during COVID-19 lockdowns.
IAG chief executive Nick Hawkins said he is “optimistic about the outlook for IAG”.Credit:
Underneath these headwinds, IAG said its gross written premium (GWP) – total revenue from insurance contracts – had rose by 3.8 per cent to $12.6 billion and insurance profits hit $1 billion, up from $741 million last year.
IAG chief executive Nick Hawkins said the GWP growth was mostly thanks to the insurer charging its customers higher premiums, but “we also saw promising new business growth and stronger customer retention”. The jump in insurance profit was due to lower motor vehicle claims as travel was brought to a standstill during COVID-19.
Despite lockdowns continuing to plague major cities in Australia, IAG has released guidance targeting “double-digit insurance margins” over the next three to five years in its underperforming intermediated business, which includes farm, car and travel policy sales through its CGU and WFI Insurance brands. IAG is aiming to deliver an insurance profit of $250 million per year in this arm during that period, it flagged, having reported an insurance loss of $10 million over the past financial year.
Mr Hawkins said he was confident the group could continue to support customers challenged by COVID-19, while pursuing growth by investing in technology and better risk management.
“We are optimistic about the outlook for IAG and are reintroducing guidance for [financial year 2022],” Mr Hawkins said. “COVID-19 continues to affect us all, and we were pleased to continue customer support measures we introduced in 2020. More than 68,000 policyholders have taken up these measures which include premium reductions and deferrals.”
Morningstar analyst Nathan Zaia had a full-year dividend of 18¢ a share, and said the slightly higher payment indicates there are “no large surprises lurking”.
“Insurers across Australia and globally have been faced with the same sort of dilemma – investment income falling, continuing to be hit by higher natural hazard events and there’s been quite high claims inflation,” Mr Zaia said.
“If you look across the industry, all insurers are making pretty mediocre returns. The only way for them to start generating decent returns for shareholders is premium increases. And when the whole industry has to do it, it feels like it’s achievable.”
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