IAG share price on watch as company reports $347 million in earnings

IAG has reported its FY22 results. Here are the details.

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Key points

  • IAG’s gross written premiums grew in FY22 from improved business performance
  • Investment income lowered due to interest rates and adverse credit spreads
  • Dividend down 45% to 11 cents per share, paying 78% of the company’s net profit after tax

The Insurance Australia Group Ltd (ASX: IAG) share price is one to watch today after the company reported its FY22 results this morning.

The insurer reported a net profit after tax (NPAT) of $347 million during this period, an improvement from the loss of $427 million it recorded in FY21.

The IAG share price is up 0.43% so far this week. Yesterday shares closed at $4.61 each.

What did IAG report?

Among the highlights of the IAG report were:

  • Gross written premiums up 5.7% from FY21, to $13.31 billion
  • Net insurance profit down 41.8% from FY21, to $586 million
  • Cash earnings down 71.5% from FY21, to $213 million
  • Underlying insurance margin down 10bps, to 14.6%

IAG reported growth in its top line with gross written premiums, but its net insurance profit contracted 48.8%.

Gross written premium (GWP) growth was buoyed by an increase in the company's business performance despite facing headwinds in the form of challenging investment markets and natural perils claims.

What else happened in FY22?

Diluted earnings per share (EPS) is up 13.33 cents. In FY21 it was a negative 17.82 cents.

IAG reported that COVID-19 had a material impact on the company's performance in 1H22, reducing its gross written premiums and increasing insurance profits. In 2H22, no material impact was recorded.

A loss of $105 million was also reported for investment income on shareholders' funds. The primary cause was due to increased rates and negative credit spreads for its fixed income portfolio, which caused a $68 million loss.

What did management say?

IAG managing director and chief executive officer Nick Hawkins said:

Our FY22 financial results reflect the quality of our underlying business as we build a stronger and more resilient IAG.

We had strong GWP growth, and the performance of our business was steady despite the challenging external environment. We are on track to deliver against our strategic priorities.

What's next?

Gross written premiums were given a "mid-to-high single-digit growth". The company expects growth in volume and customer numbers.

The insurance margin is tracked to be between 14% to 16%. This is supported by IAG's business performance and higher yields on investments.

IAG is also looking to achieve a higher return on equity (ROE) of 12% to 13% over the medium term. A growing customer base of one million to 9.5 million in FY26 will support this, along with an insurance profit of $250 million by FY24.

IAG share price snapshot

The IAG share price is down 15.4% over the last 12 months.

Shares in the company are not beating the broader market, with the S&P/ASX 200 Index (ASX: XJO) down 6.82% over the same period.

IAG has a market capitalisation of $11.36 billion.

Motley Fool contributor Matthew Farley 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 has positions in 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 Scott Phillips.

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