IAG share price marching higher on 25% profit boost

The insurer reported adding more than 100,000 direct customers across Australia and New Zealand over the six months.

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Key points

  • The IAG share price is up 3.18% on the release of the company's half-year results (1H FY23)
  • Underlying NPAT increased 25% from 1H FY22
  • A six cents per share dividend was declared, partly franked

The Insurance Australia Group Ltd (ASX: IAG) share price is in the green in morning trade, up 3.18%.

The S&P/ASX 200 Index (ASX: XJO) insurance stock closed on Friday trading for $4.71 per share. Those shares are currently changing hands for $4.86 apiece.

This comes following the release of the company's half-year results for the six months ending 31 December (1H FY23).

Read on for the highlights.

IAG share price gains on profit boost

  • Gross written premium (GWP) of $7.06 billion, up 7.5% from 1H FY22
  • Underlying insurance margin of 10.7%, down from 15.1% from the prior corresponding half year
  • Net profit after tax (NPAT) leapt 171% year on year to $468 million
  • Common equity tier 1 (CET1) multiple increased nine points to 1.11
  • Declared a six cents per share (cps) dividend, 30% franked, in line with 1H FY22's unfranked six cps dividend

What else happened during the half year?

The IAG share price could also be receiving some tailwinds after the insurer reported adding more than 100,000 direct customers across Australia and New Zealand over the six months.

Retention levels for motor insurance were 91% while home insurance retention rates were 95%.

The company attributed its GWP growth to higher rates driven by inflation pressures, along with growing home and motor policies in its Australian DIA business.

Impacted by some large events over the half year, IAG's natural perils costs came in at $524 million. That's $70 million higher than the allowance.

Excluding the business interruption provision release of $252 million post-tax, underlying NPAT was $216 million, up 25% from the $173 million reported in 1H FY22.

What did management say?

Commenting on the results helping boost the IAG share price today, CEO Nick Hawkins said:

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 growth in seven years…

Our digital transformation is progressing well… 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.

What's next?

Looking at what could impact the IAG share price in the months ahead, the ASX 200 insurer upgraded its FY23 forecast GWP growth from mid-to-high single-digit growth to around 10%.

IAG is now forecasting a reported insurance margin of around 10% compared to previous FY23 guidance of 14% to 16%. And its full 2023 financial year natural perils allowance was increased to $1.15 billion following the storms and flooding in Auckland.

"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," Hawkins said.

IAG share price snapshot

As you can see in the chart below, the IAG share price is back in the green for the past 12 months, up 2% since this time last year.

Motley Fool contributor Bernd Struben 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 no position in any of the stocks mentioned. 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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