IAG Reports GWP Rise Of 5.7% Raises Perils Budget For 2023

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IAG Reports GWP Rise Of 5.7% Raises Perils Budget For 2023

According to IAG’s most recent data, gross written premiums increased 5.7% between FY 2021 and FY 2022. The company did note that their insurance margin of 7.4% fell short of its projections.

It noted in the results that this was due to increased natural calamities that cost $1,119 million against its allowance of $765 million, a negative credit spread impact of $45 million, and strengthening of prior year reserves of $172 million.

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The underlying insurance margin decreased from 14.7% the year before to 14.6% this year.

The success of the underlying core business and a $200 million pre-tax release from the business interruption provision are reflected in the net profit after tax of $347 million (FY21: $427 million loss).

IAG Reports GWP Rise Of 5.7% Raises Perils Budget For 2023

IAG’s managing director and CEO, Nick Hawkins, wrote in the report: “As we develop a stronger and more resilient IAG, our FY22 financial results reflect the quality of our core company. The performance of our business remained stable despite the difficult external climate, and we had good GWP growth.

Hawkins focused particularly on the role of climate change and its effects on the business in his remarks.

He wrote that it was one of the most-important challenges now being faced, adding: “FY22 was one of the most significant peril years we have experienced, with multiple events in Australia and New Zealand, including the February 22 floods in northern New South Wales and along the east coast.

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Across Australia and New Zealand, claim lodgements relating to extreme weather events in FY22, more than doubled over the prior year. To deal with the increasing severity and frequency of extreme weather events, we have put in place our largest to date perils allowance, increasing it by 19% to $909m for FY23.”

Looking ahead, IAG said it was looking at mid-to-high single digit GWP growth and a reported Insurance margin of 14% to 16% for FY 2023.

IAG Reports GWP Rise Of 5.7% Raises Perils Budget For 2023

According to Hawkins, “Our FY23 projection aligns to our aspirational targets to achieve a reported ROE of 12 to 13% over the medium term and an insurance margin of 15% to 17%. These objectives include our aspirations to increase customer interactions through the company’s digital channels, increase our customer base by 1 million to 9.5 million by FY26, achieve an insurance profit of at least $250 million by FY24 in our Intermediated Australia business, maintain the Group’s cost base at $2.5 billion through further simplification and efficiencies, and generate $400 million in value from DIA claims and supply chain cost reductions on a run rate basis from FY26.

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We are in a good position to control inflationary pressures in the upcoming year because to programs like the Motor Repair Model and Home Claims Assist Pilot, he continued. By delivering superior service to our consumers through automation, digitisation, and most crucially, customer empowerment, our next evolution of claims program will set us apart. The potential of customer empowerment is unlocked through the next evolution of claims, one of many initiatives that will seek to bring $400 million in value to IAG.

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The company has recently received service of a class action lawsuit regarding its Covid business interruption claims.

Beginning of the month, Reinsurance News reported that the company had acknowledged receiving notice of a class action lawsuit filed in the Supreme Court of Victoria on behalf of individuals who purchased shares of IAG between March 11, 2020, and November 20, 2020. At the time, the firm declared that it would be representing the plaintiff in the case.

IAG Reports GWP Rise Of 5.7% Raises Perils Budget For 2023

Back in March of this year, IAG stated that there would be no adjustments to its $1.222bn net provision for potential business interruption claims related to the COVID-19 pandemic.

This followed a February decision by Australia’s High Court to upheld the arguments of insurers in a BI legal case by finding that in the majority of cases, insurers are not liable to indemnify policyholders.

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While positive for carriers, the judgement did also find that certain businesses could make valid claims on pandemic losses on certain limited policies, provided the cause of losses could be identified.

This led to several insurers and reinsurers, including IAG, Swiss Re and Chubb, to look to contest the verdict of the pandemic test case.

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