Monday 24 August 2015 by Justin McCarthy Company updates

IAG FY15 results update

THIS CONTENT IS SUITABLE FOR WHOLESALE INVESTORS ONLY

Insurance Australia Group Limited (IAG) reported a slightly disappointing FY15 net profit after tax (NPAT) of $728m, down from $1.2bn a year earlier

Much of the decline was due to a $495m increase in natural peril (or natural catastrophe) claim costs as the Brisbane hail storm and other weather related events took their toll.

Highlights of the results were as follows:

  • NPAT of $728m (FY14 $1.2bn)
  • Insurance profit of $1.1bn (FY14 $1.6bn)
  • Gross written premium growth of 17% to $11.4bn (FY14 $9.8bn) predominately due to the Wesfarmers Insurance acquisition
  • APRA prescribed capital amount (PCA) multiple was 1.70x, well above the target range of 1.4x to 1.6x. However, this high reading may ultimately see the return of excess capital to shareholders in the next year or so (via increased or special dividends). This has been a clear trend for insurers in recent times, including rivals QBE and Suncorp
  • Dividends paid for the full year were 29c versus 39c in FY14, however the payout ratio was consistent at 70% in each year
  • In terms of guidance, the company stated “underlying profitability in FY16 is expected to be consistent with that of FY15”

The FY15 results were not affected by the 20% quota share arrangement with Berkshire Hathaway, announced on 16 June 2015.  This arrangement commenced on 1 July and is expected to reduce earnings volatility for the Group.

Further details can be found on IAG’s websiteExternal link - opens in a new window where you can download the reportExternal link - opens in a new window.

Despite the decline in profitability, IAG’s credit metrics remain solid and we remain comfortable with their various debt securities. Please contact your FIIG representative for more information.