The Insurance Australia Group Ltd (ASX: IAG) share price is in focus on Wednesday after the company posted its FY24 results, with a large jump in profits.
Before the open, the stock is settled at $7.44 apiece, having gained 31% this year to date.
Let's see what the insurance giant posted.
IAG share price in focus on profit growth in FY24
- Net profit after tax (NPAT) of $898 million for FY24, up 7.9% from FY23.
- Insurance profit surged 79.1% to $1.44 billion.
- Reported insurance margin of 15.6%, up from last year's 9.6%.
- Net earned premiums rose by 11% year over year
- Natural perils costs came in at $983 million, $115 million below the allowance.
- Declared a final dividend of 17.0 cents per share (cps), bringing total FY24 dividend to 27 cps.
What else happened in FY24?
The IAG share price performed well in FY24, and the insurance giant came in with a strong set of numbers. Its financials were positively impacted by reduced natural peril costs and growth in premiums.
Gross written premium (GWP) was up 11% year over year to $16.4 billion, translating to a similar growth in net earned premiums.
Segment-wise, the Direct Insurance Australia business saw a 19% jump in insurance profit, whereas the Intermediated Insurance division posted a 57% growth.
Meanwhile, the New Zealand arm of IAG saw its insurance profit stabilise back to $457 million after the Auckland floods last year.
Given the profits earned on all its business lines, the board increased IAG's dividend by 80% compared to last year to 27 cents after declaring a final payment of 17 cents per share. This may impact IAG's share price.
What did management say?
IAG managing director and CEO Nick Hawkins was notably pleased with the result:
Today's result reflects the strength of the IAG business and the operational improvements we have implemented. The trust our customers have in our brands is reflected in continued high customer advocacy and retention in our retail businesses in Australia and New Zealand.
We know it's been a challenging time for our customers, and we are well positioned to continue supporting them and the broader economy.
But it wasn't all sunshine and roses. Hawkins, like many CEOs, is cautious about the economy moving forward.
We have previously said inflation, increasing weather volatility, and rising reinsurance costs were major factors affecting customer premiums.
We are beginning to see some signs of inflation easing, and our long-term reinsurance agreement announced in June is expected to reduce year-on-year volatility from extreme weather events and help stabilise costs for our customers over the longer term.
What's next?
Looking ahead, IAG has set clear targets for FY25, including gross written premium (GWP) growth in the "mid-to-high single digits".
Further, it looks to generate an insurance profit between $1.4 billion and $1.6 billion. This equates to a reported insurance margin between 13.5% and 15.5% if the company hits these figures.
Management laid out additional assumptions:
It also assumes a natural perils allowance of $1,283m, which is an increase of $185m or 17% on the FY24 allowance factoring in the long-term reinsurance protections announced in June 2024.
IAG share price snapshot
The IAG share price has been on a tremendous run over the past 12 months, growing nearly 30% in value.
It has outpaced the S&P/ASX 200 index (ASX: XJO) by more than 16% over that time. This is quite a feat, considering the index has posted numerous all-time highs this year.
