IAG achieved an improved underlying performance in the first half of the 2018 financial year, consistent with guidance provided at the beginning of the year.
“This is an encouraging result for IAG. It reflects solid like-for-like gross written premium (GWP) growth of nearly 4%, primarily achieved through rate increases in commercial and consumer, along with some volume growth in motor. At a reported level, our comprehensive reinsurance protection in the half saw net natural peril claim costs below allowance while a higher favourable credit spread impact and larger than anticipated reserve releases also helped boost our reported margin.”
“We have raised our full year reported margin guidance to 15.5 – 17.5% based on a positive revision to expected reserve releases and credit spreads and we have reaffirmed our low single digit GWP growth expectation.”
“Operationally, our optimisation program continues to track to plan and we have announced a strategic review of the options for our Asian businesses which we expect to be complete by the end of the calendar year.”
“We started to see a favourable impact over the half of a number of initiatives we have put in place. This included programs of work around combating claims inflation through our car hire initiatives and customer choice campaign, accelerating our partnering with global experts to simplify processes and reduce complexity, and the bedding down of the Australia Division, created in July last year.”
In Summary:
Improved Underlying Margin of 12.6% (Over 2H17)
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- Reduced pressure on motor profitability as increased rates earn through
- Maintained improved NSW CTP profitability seen in 2H17, following initial reform measures
- Earn through of prior period commercial rate increases
- Reversion to more normal large commercial loss experience
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Higher Reported Margin of 17.3% (1H17: 13.5%)
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- Net natural peril claim costs $78 million lower than allowance at $262 million (1H17: $420 million), following $120 million of protection from aggregate reinsurance cover
- Larger favourable credit spread impact of $47 million, compared to $5 million in 1H17
- Higher than originally expected prior period reserve releases of $121 million, equivalent to 2.8% of NEP, down from $155 million in 1H17 1
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Note: IAG defines its underlying insurance margin as the reported insurance margin adjusted for:
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- Net natural peril claim costs less related allowance for the period
- Reserve releases in excess of 1% of NEP
- Credit spread movements.
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