Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

IAG (ASX:IAG) share price unmoved despite guidance uplift

The Insurance Australia Group Ltd (ASX: IAG) share price is unmoved today despite the company rising cash profit by 62% in the first half. 

The Insurance Australia Group Ltd (ASX: IAG) share price is unmoved today despite the company rising cash profit by 62% in the first half.

Keep up to date with the February 2022 reporting season calendar.

IAG is an insurance provider to households and businesses across its stable of brands including NRMA, RACV, CGU and State Insurance NZ.

Source: IAG 1H22 Results Presentation
Source: IAG 1H22 Results Presentation

Growth across all divisions

Key highlights from the first half ending 31 December 2021 include:

  • Gross written premiums (GWPs) of $6.18 billion, up 6.2% year-on-year (YoY)
  • Cash earnings of $176 million, down 62.1% YoY
  • Net profit after tax of $173 million, a reversal of the $460 million loss in the corresponding period
  • Dividend of 6 cents per share, down from 7 cents

GWP – the revenue IAG receives for its insurance policies – increased largely as a result of increased prices passed onto consumers to keep up with inflation.

Intermediated insurance – which acts as a broker between insurer and policyholder – was the strongest performer increasing revenue by 9%.

Similarly, New Zealand achieved a 5.9% increase while underlying margins improved.

The direct insurance division achieved volume growth of 3.3%. Growth in motor and home policies was offset by a reduction in third-party and commercial.

Accounting trickeries

Net profit improved but cash profit went down. How can this be?

Cash profit is a better illustration of the underlying business, whereas net profit includes non-cash items.

In the prior period, IAG had to allocate a $1.15 billion provision for potential COVID-19 claims, reducing last year’s result and flattering this year’s net profit.

Cash profit sunk due to $681 million in natural disaster costs.

October was a particularly bad month, with storms across SA, Tasmania and Victoria weighing on IAG’s insurance margin.

The higher claim costs are not exclusive to IAG, with competitor Suncorp Group Ltd (ASX: SUN) incurring lower cash earnings.

What’s next for the IAG share price?

IAG upgraded its GWP growth forecast from low single-digit to mid-single-digit growth for FY22.

Conversely, it cut reporting margin guidance from 13.5%-15.5% to 10.0%-12.0%.

The margin reduction is primarily from increased natural peril costs and to a less extent reserve strengthening and subsiding pandemic benefits.

The business also reiterated its aim to add 1 million customers and $400 million of cost reduction over the next by FY26.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Lachlan does not have a financial or commercial interest in any of the companies or funds mentioned.
Skip to content