IAG has announced a 48.6% boost to net profit after tax in its FY17 results.
The insurer saw profit climb to $929m, compared with $625m last year, as GWP for the business grew by 3.9% to $11.8bn driven by higher rates on short tail motor, in response to claims inflation, as well as continued rate increases in the Australian commercial insurance market.
Peter Harmer, IAG managing director and CEO, said that the firm had delivered “a sound result”.
“Overall GWP growth reflects positive momentum in our commercial business and rate responses to claims inflation, particularly in our short tail motor insurance businesses in Australia and New Zealand,” Harmer said.
The firm announced that underlying insurance margin, the preferred performance measure of IAG, fell 2.1% due to the adverse impact of claims costs in the short tail motor business in both Australia and New Zealand and elevated losses in commercial.
“We have a number of initiatives underway that look at how we can reduce the cost of managing claims in a way that creates affordable insurance options for customers both now and into the future,” Harmer continued.
“We expect these initiatives, which are being created in consultation with our customers, to be finalised in the first half of the 2018 financial year.”
In their business insurance division, IAG saw like-for-like GWP growth of over 4%, reflecting positive momentum in commercial rates and maintained retention levels.
The consumer division saw GWP increase by 5.5% to $6.1bn thanks to growth in both short tail home and motor lines as well as long tail CTP.
Net natural peril costs for the business stood at $822m, exceeding the IAG allowance by over $140m, as the Kaikoura earthquake, Cyclone Debbie and the northern Sydney hailstorm all had an impact.
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