FY23 Financial Highlights

• GWP up 10.6% to $14.7b
• Insurance profit up 37% to $803m
• Reported insurance margin of 9.6%, up from 7.4% in FY22
• Underlying insurance margin of 12.6%, down from 14.6% in FY22
• Net Profit After Tax of $832m, up 140%
• Total claims paid around $10.2b, up 20%
• Final dividend at 9cps

Financial performance

“FY23 was a solid year for IAG, reflecting the positive momentum in our core businesses and the significant progress we’ve made to create a stronger and more resilient company.

Our Gross Written Premium (GWP) growth is above 10% for the year. We maintained our Group operating costs in line with our target of $2.5b for the third year in a row, lowered our expense ratio, and improved our Net Profit After Tax (NPAT) in a challenging economic environment.

Our FY23 result was driven by steps we took in 2021 to reset the business with a simpler operating model and a greater focus on our core business.

Building on first half momentum, GWP grew 10.6%, (FY22: 5.7%) in FY23 and ahead of our guidance of around 10%. While the increase was largely due to premium rises across the three businesses in response to inflation pressures and higher reinsurance and natural perils costs, we continued to grow our customer base, and retention levels in our Direct Insurance Australia (DIA) business remained high.

Our reported insurance margin was 9.6% (FY22:7.4%). The improved margin benefited from credit spread gains and lower prior year reserve strengthening. The insurance profit rose 37% to $803m (FY22: $586m).

Elevated inflation in home and motor claims costs, as well as the higher natural perils allowance impacted our underlying insurance margin which narrowed to 12.6% (FY22:14.6%). Excluding $67m in reinsurance reinstatement costs, the adjusted underlying margin would be 13.4%.

Our NPAT increased to $832m (FY22: $347m), benefiting from a post-tax business interruption provision release of $392m. It came in a year where we paid around $10.2b in claims to support our customers, up approximately 20% on FY22.

GWP growth was solid across our DIA, Intermediated Insurance Australia (IIA) and New Zealand businesses. DIA’s underlying insurance margin increased from 13.2% in 1H23 to 18.2% in 2H23 to deliver a FY23 underlying insurance margin of 15.7%

(FY22: ~19% excluding Covid-19 benefit). We were also pleased with the 38% reduction in outstanding home claims achieved this year.

IIA reported a higher underlying margin of 7.7% (FY22: 5%), underscoring the momentum in the business. New Zealand’s underlying insurance margin of 13.5% (FY22: 16.8.%) largely reflected higher underlying claims and reinsurance costs.

Executing on strategy

We made sound progress against our strategic priorities adding approximately 132,000 customers in our DIA business, while IIA finished the year strong with an insurance profit of $209m (FY22: $103m loss), on track to meet its FY24 insurance profit target of at least $250m.

As noted at our recent Investor Day, since the start of FY22 we’ve created ~$70m of recurring savings by reducing claims and supply chain inefficiencies and continuing to extend our repair footprint.  We now have approximately 15% of vehicles going through our Repairhub network in Australia and New Zealand.

We’ve continued the roll out of the Enterprise Platform and introduced more digital capabilities than ever before, with over 100 new mobile, automation and online features added across DIA, IIA and the New Zealand businesses.

Climate change and natural perils

FY23 was another significant perils year and we saw the devastating impacts of multiple large-scale events across Australia and New Zealand on our customers and communities. We are now moving to warmer and dryer conditions which should see a shift away from rain dominated claims.

We’ve increased our FY24 natural perils allowance by 26% to $1.147b, up from $909m in FY23. We estimate around 20% of premiums we collect now cover reinsurance costs and the perils allowance.

We will continue to play our part in supporting our customers and communities and remain committed to working with all levels of government on initiatives that will improve community resilience and reduce risk.

Confidence in outlook