IAG share price on watch after profit rockets 140%

The ASX insurance giant has reported bumper FY23 results. How will the market react?

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The Insurance Australia Group Ltd (ASX: IAG) share price will be keenly monitored on Monday after the company reported bright FY23 results before market open.

What did the company report?

  • Revenue up 8.2% to $19.85 billion
  • Net profit after tax (NPAT) up 139.8% to $832 million
  • Gross written premium (GWP) up 10.6% to $14.7 billion
  • Total claims paid up 20% to ~$10.2 billion
  • Final dividend of 9 cents to bring 2023 total to 15 cents, up from 11 cents in 2022

What else happened in FY23?

While many Australian consumers and businesses are in pain after 12 interest rate rises, insurance providers are one group singing a merry tune.

That's because higher rates mean better returns from the premiums that are invested. Indeed, IAG's reported credit margin was 9.6% compared to 7.4% a year ago.

The company noted in its highlights that since the start of the 2022 financial year, it has created about $70 million of recurring savings by "reducing claims and supply chain inefficiencies and continuing to extend our repair footprint". 

What did IAG's management say?

IAG chief executive Nick Hawkins said on Monday:

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

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.

What's next for IAG?

IAG is forecasting that GWP will grow in the "low double-digits" over the current financial year.

The reported insurance margin guidance is 13.5% to 15.5% and is expected to deliver an insurance profit of between approximately $1.2 billion and $1.45 billion.

GWP growth guidance of 'low double-digits' will primarily be rate driven to cover claims inflation, higher reinsurance costs and an increased natural perils allowance. The GWP guidance includes expected modest volume growth and an increase in customer numbers.

IAG share price snapshot

Before market open on Thursday, the IAG share price had already soared 25.3% since the start of the year.

This compares favourably to the S&P/ASX 200 Index (ASX: XJO), which is up just 2.9% year to date.

Motley Fool contributor Tony Yoo 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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