Financial performance

We delivered an improved net profit after tax and reported margin in the first half in challenging economic conditions.  

We maintained good cost discipline, our businesses are in good shape, and our focus on growth and profitability delivered the strongest first half Gross Written Premium (GWP) growth in seven years, up 7.5% (1H22: 6.2%). 

GWP growth was driven by rate increases, to offset the high inflation in the supply chain, as well as customer number growth in the home and motor portfolios.

Net profit after tax was up on the corresponding half year at $468m (1H22: $173m) and included a post-tax Covid business interruption provision benefit of $252m.

Our reported insurance margin of 8.5% (1H22: 7.1%) reflected growth across the business but was offset by the ongoing impacts of higher inflation on claims costs in home and motor. A $70m unfavourable net natural perils experience and a $48m prior year reserve strengthening also impacted the margin.

Our expense ratio improved by 110 basis points to 22.9%. We remain on track to maintain the Group’s full year cost base of approximately $2.5bn.

Our Intermediated Insurance Australia (IIA) division performed well over the half, recording GWP growth of 7.8% (1H22: 8.9%) and an insurance profit of $49m (1H22: $4m loss). The underlying insurance margin also improved to 5.7% (1H22: 5%).

GWP grew by 9% in the Direct Insurance Australia (DIA) business. While the growth was mostly due to rate increases, we also saw volume growth of more than 2% across home and motor, and retention levels remained high.

The deteriorating inflationary environment in the half year had an immediate impact on our businesses. Our DIA business was most impacted with a reported insurance margin of 8.9% (1H22: 10.5%).

GWP growth in New Zealand was 9.1% in NZ currency and the reported margin increased to 15.2% (1H22: 11.4%).   

Delivering on strategy

We are making solid inroads against our strategic priorities and medium-term ambitions in the half. 

IIA continued to build the momentum needed across its business to achieve its $250m profit ambition in FY24.  Benefits from a number of initiatives were realised, such as embedding a simplified operating model and upgraded pricing and underwriting capability. We also   strengthened our broker relationships, reflected in CGU being awarded Large General Insurer of the Year by NIBA.

Customer take up of digital channels gained traction over the half and we are seeing further simplification gains through supply chain and claims initiatives.

Our digital transformation is progressing well with the Enterprise Platform now deployed in parts of the Direct and Intermediated businesses, and rollout for the New Zealand business will start in the second half. New mobile, automation and online features were introduced across IAG in the first half, delivering simpler and faster experiences for our customers, partners and brokers.

Confidence in FY23 outlook

As noted in our market update on 3 February 2023, we are forecasting FY23 GWP growth to be around 10%, an increase from the previous guidance of mid to high-single digit growth.

We expect our FY23 reported insurance margin to be around 10% compared to our previous range of 14% to 16%.  This is largely due to the expected higher natural perils costs from the Auckland flood event.

Despite the challenges from the high inflation and perils experience impacting our business in the half, I believe we have a sound basis for confidence as we move into the second half.  

We are well positioned on a number of fronts – the quality of our brands and customers, our strong capital position where we have a third of our business on multi-year quota share arrangements, and our focused strategy is delivering results.

It’s this strong position which gives us confidence in our FY23 outlook, the financial return we can deliver to our shareholders, and the opportunities ahead.”

Nick Hawkins

IAG Managing Director and
Chief Executive Officer

For more information on our results visit our Results and Reports page.