Insurance Australia Group Ltd (ASX: IAG) shares are up 0.83% to $7.87 on Friday.
Today's share price rise follows yesterday's savaging when IAG shares fell 12.56%.
This followed the release of IAG's FY25 half-year results.
Investors weren't happy and IAG shares were heavily sold off.
The insurer announced an interim dividend of 12 cents per share, with 60% franking, to be paid on 7 March. This is 20% higher than last year's interim dividend.
Investors interested in buying IAG shares to get the boosted dividend must be quick.
This is because IAG shares go ex-dividend next Tuesday, 18 February.
Investors who want IAG to automatically buy more shares through its dividend reinvestment plan (DRP) must submit their DRP elections by 5pm AEST next Thursday, 20 February.
Now, let's review the half-year results.
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IAG shares to pay 20% higher interim dividend
For the six months ended 31 December, IAG reported a 6% increase in gross written premiums (GWP) to $8,426 million.
There was also a 9.7% bump in net earned premiums to $4,930 million.
The pre-tax insurance profit was $957 million, up 56%, with a reported margin of 19.4%.
The insurer's natural perils costs were $215 million below the allowance.
The net profit after tax (NPAT) was $778 million, up 91%.
IAG said contributing factors to the turbocharged NPAT were the $140 million post-tax release of the COVID Business Interruption provision and higher net earned premiums and insurance profit.
The supersized NPAT led to the board upping the dividend by 20% to 12 cents per IAG share.
IAG's managing director and CEO, Nick Hawkins, said favourable weather conditions and strong investment markets also boosted the NPAT.
He commented:
These more favourable periods allow us to build up reserves to pay future claims when we need to.
Hawkins said IAG was in a strong position to grow its current customer base of 7.2 million direct and partner customers in the second half.
The company is guiding a full-year reported insurance profit of between $1,400 million and $1,600 million.
It expects a reported insurance margin towards the high end of the 13.5% to 15.5% range.
However, IAG also expects GWP growth at the lower end of its forecast mid to high single-digit range.
This is due to improving claims trends and lower reinsurance costs, which mean lower premium increases for customers.
Is IAG a buy?
After reviewing the 1H FY25 results, top broker Goldman Sachs has maintained a neutral rating on IAG shares. But it has also cut its 12-month price target from $8.30 to $8.15.
In the year to date, IAG shares have fallen 8.5%.
This follows a big year of growth in the 2024 calendar year when the share price rose 49.5%.
