Yahoo Finance

• Net Profit After Tax (NPAT): Increased by 91.2%, driven by higher insurance profit and a $140 million post-tax release from the business interruption provision.

• Cash Earnings: Up 54.2%, excluding the business interruption provision.

• Interim Dividend: Increased by 20% to $0.12 per share.

• Gross Written Premium (GWP) Growth: 6%, primarily driven by rate increases.

• Underlying Margin: 15.1%, towards the top end of the reported margin guidance range.

• Natural Perils Cost: $426 million, $215 million below allowance.

• Underlying Claims Ratio: Improved to 52.6%, a 300 basis point improvement from the previous year.

• Expense Ratio: Decreased by 10 basis points.

• Investment Yield: 5.5% return on technical reserves portfolio, contributing $227 million.

• Capital Position: Strong, with CET1 position well above target.

• Warning! GuruFocus has detected 4 Warning Signs with ASX:AQZ.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Insurance Australia Group Ltd (IAUGF) reported a strong financial performance for the first half of 2025, with NPAT up 91.2% and cash earnings up 54.2%.

• The company declared an interim dividend of $0.12 per share, reflecting a 20% increase, and maintained a strong capital position.

• IAUGF's underlying margin was in line with its through-the-cycle target of 15%, demonstrating consistent and reliable performance across its portfolios.

• The company has successfully implemented a retail enterprise platform, improving customer experience and pricing capability, with over 3 million policies migrated.

• IAUGF's investments in technology and claims management have resulted in the lowest levels of unresolved claims since the 2022 floods, enhancing operational efficiency.

Negative Points

• The company's average ROE over the past five years was just under 10%, below its targeted return of 14% to 15%, indicating challenges in achieving desired profitability.

• IAUGF has experienced volatility due to natural perils, which have negatively impacted its performance and the broader industry.

• The company faces ongoing challenges in the New Zealand market, with a tough economic environment leading to flat or slightly negative volume growth.

• Reinsurance costs increased by $125 million, primarily due to additional perils and reserves protections, impacting overall expenses.

• IAUGF's New South Wales CTP segment has seen an uptick in frequency, leading to a $10 million increase in the onerous contract provision, indicating potential challenges in this area.

Q & A Highlights

Q: Can you explain the revised GWP growth guidance and where you expect pricing to moderate? A: Nicholas Hawkins, CEO, explained that inflation is coming down, particularly in Motor and Home portfolios. Motor costs are increasing at low to mid-single digits, while Property is slightly higher. This moderation is reflected in pricing, leading to guidance towards the lower end of the mid- to high-single-digit growth range.