Insurance Australia Group (IAG) SNAPSHOT
Profile: Insurance Australia Group (IAG) is Australia and New Zealand’s largest general insurance company. It sells a variety of insurance products through brands such as NRMA, CGU, RACV and Lumley Insurance. IAG also has operations in Asia. The product range in its Consumer division includes home and motor products as well as compulsory third party (CTP) insurance. It also offers commercial insurance products such as workers compensation, commercial motor vehicle insurance and other speciality lines of insurance for businesses.
History: In 2000, NRMA demutualised and was listed on the ASX as NRMA Insurance Group. In 2002, the group changed its name to Insurance Australia Group. In June 2015, IAG entered into a long-term strategic partnership with Berkshire Hathaway, underpinned by a 10-year 20% quota share agreement. In December 2017, IAG entered into another five-year 12.5% quota share arrangement with its reinsurers. IAG sold its businesses in Thailand and Indonesia in August 2018 and September 2019 respectively.
Earnings composition: $662m (54%) of IAG’s FY19 insurance profit came from the Consumer division. The Business division contributed 14% of earnings with $180m, while the New Zealand division generated $390m, or 32%, of insurance profit.
Most recent result – 1H20: IAG’s insurance profit was largely in line with the prior corresponding period (pcp) at $501m. IAG experienced high levels of natural perils, which are catastrophic events such as bushfires – the net cost of perils during 1H19 was $419m. Gross written premium increased 1.4% on the pcp to $5.9bn. Net profit after tax decreased 43% on the pcp to $283m, from $500m, as the 1H19 result included a $208m gain from the sale of its Thailand business. IAG declared a partially franked dividend of 10 cents, down from 12 cents in the pcp.
Company outlook: The sale of IAG’s 26% interest in SBI General is expected to complete by FY20, resulting in a $300m+ NPAT contribution. The counterparty to the previously announced sale of IAG’s interests in Vietnam was unable to receive regulatory approvals. IAG is therefore assessing alternative exits. IAG expects low single-digit GWP growth and a reported insurance margin of 12.5-14.5% in FY20.
Important dates: Ex-dividend date is 18 February 2020. Payment date is 25 March 2020. FY20 results are scheduled for 7 August 2020.
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