IAG (ASX: IAG) share price falls after earnings despite dividend boost

Why shares in the Aussie insurer are on a rollercoaster ride this Wednesday

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The Insurance Australia Group Ltd (ASX: IAG) share price has pared back early gains following the insurer's latest full year results release.

IAG share price falls despite increased dividends

The Aussie insurer announced its full year results for the period ended 30 June 2021 (FY2021) prior to market open.

Cash earnings jumped 170% to $747 million compared to last year with insurance profit climbing 35.9% to $1,007 million.

The IAG share price shot higher at the open following this morning's update but has since fallen into the red. Other highlights included a 3.8% growth rate for Gross Written Premium (GWP) and a full year dividend up 100% to 20 cents per share.

Despite reporting a $427 million net loss after tax due to one-off costs, there were some positives for IAG. An improved insurance margin of 13.5% was notably boosted by robust customer retention numbers and lower natural peril costs.

Today's announcement saw the IAG share price climb higher at the open before falling later in the morning. That's despite the Board doubling the FY2020 dividend on the back of stronger cash earnings.

The 20 cents per share distribution represents a 66% payout ratio of cash earnings, within the target range of 60-80%.

What's the outlook for FY2022?

The IAG share price started the day strongly before edging into the red this morning. Investors are interested in not just FY2021 numbers but also what lies ahead.

IAG is forecasting "low single-digit GWP growth" and an insurance margin of between 13.5-15.5% for FY2022.

Management was bullish on the outlook for this year with Managing Director and CEO Nick Hawkins saying the below:

We are optimistic about the outlook for IAG and are reintroducing guidance for FY22.

The strength of our core business and its sound underlying performance in FY21, our new operating model with clear, embedded executive responsibilities, as well as greater certainty in the economic outlook, mean that we are confident that IAG's underlying performance will continue to improve."

How has the IAG share price performed in 2021?

Shares in the Aussie insurer are falling late on Wednesday morning following today's results. The ASX insurer's shares are up more than 10% in 2021 but still lag the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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