The Insurance Australia Group Ltd (ASX: IAG) share price has climbed 1.13% to $7.63 following this morning's annual general meeting (AGM).
The ASX financial stock is outperforming the S&P/ASX 200 Index (ASX: XJO), currently up 0.1%.
Let's see what IAG management told investors at the meeting.
IAG share price up on FY25 guidance confirmation
In today's speech, IAG managing director and CEO Nick Hawkins told the AGM the company was on track to achieve the FY25 guidance it had given ASX investors back in August.
IAG is targeting an insurance margin of 13.5% to 15.5% and gross written premium growth in the mid-to-high single digits.
This assumes natural perils at about 18% more than the FY24 allowance. Hawkins commented that the insurer had had relatively low natural perils in the first quarter of FY25.
The CEO added he was confident that IAG could deliver strong shareholder returns based on its through-the-cycle return on equity (ROE) target of between 14% and 15%. Hawkins commented:
Looking back over the last four years, our returns have not reached this level, as our performance has been affected by significant perils, and other internal and external issues. Pleasingly, our FY24 outcomes are much closer to those medium-term targets.
Shareholder returns
IAG chair Tom Pockett said the company had delivered about a 30% return to shareholders in FY24. This included an 80% increase in the annual dividend to 27 cents per share. Over FY24, the IAG share price rose by just over 25%.
Pockett commented:
The combination of share price growth and dividends resulted in a total shareholder return of almost 30% for the year.
In addition to paying dividends, we have also returned $550 million of capital to shareholders via onmarket buybacks during the past two years. At our full-year results reported in August, we announced a further on-market share buyback of up to $350 million.
Strong inflation, extreme weather, higher insurance premiums
Pockett blamed higher inflation and extreme weather events for rising premiums.
He said Australia and the rest of the world had experienced more natural perils than expected over the past three years.
This contributed to higher reinsurance costs, while inflation pushed up the cost of materials and labour to repair customers' homes, cars and other assets:
These factors led to higher premiums which, combined with higher interest rates, resulted in difficult years for your company, and our customers.
Hawkins said IAG offered potential discounts on monthly premiums to customers with better driving habits through the ROLLiN' brand.
The company was also rolling out an education program to help communities better prepare for an anticipated increase in natural perils due to climate change in the future. Hawkins said:
We launched NRMA Insurance Help Nation education programs with the Australian Red Cross which will deliver more than 2,000 community workshops over the next three years. We are raising public awareness of climate change impacts through initiatives like our Wild Weather
Tracker.
He added that IAG had implemented a new pricing engine in the retail business, which leveraged the expertise of its in-house climate scientists.
Technology improvements
Hawkins discussed how technology enhancements had benefitted the business and improved customers' experiences, particularly with claims. He said:
In terms of new technology, we now have a single, consistent policy, pricing and claims engine, across our entire retail business. Internally, we call this the Enterprise Platform. It is built for scale; and it is built for growth.
We already have 2.3 million customers on this platform, and 300,000 more are renewing on to it each month as we move all of our 5 million retail customers here.
We saw the benefits in action last year when we set up our ANZ bank partnership arrangement and migrated 126 thousand policies straight on to the platform.
IAG share price snapshot
The IAG share price has risen significantly over the past two years.
Last month, IAG shares hit a new five-year high of $7.92 apiece.
