IAG margins haunted by past insurance claims, again
IAG has been surprised again by a jump in costs from past claims, with the insurance giant partly blaming high inflation for bumping up the price of fixing cars.
The pressure means underlying margins for the first six months of this financial year will likely hit the lower end of guidance, Sydney-based IAG said on Wednesday.
The costs of restoring reinsurance protection after NZ floods was highlighted by IAG on Wednesday. Getty
The warning marks the latest indication of squeeze points for insurers, which in turn are passing on hefty price increases to consumers. But it also indicates the third time in almost a year that earnings expectations at IAG, one of Australia’s biggest insurers with brands including NRMA, have been weakened on what it says are unanticipated shocks.
Still, IAG told investors at its annual general meeting on Wednesday that it expected a “stronger second half as we benefit from the earn-through of pricing”.
“We are seeing positive financial signals, we have improved our underlying performance, retention rates remain very strong, we’re growing customer numbers,” IAG chief executive Nick Hawkins said.
Insurers have been pushing through double-digit premium price rises, with IAG saying at profit results released in August it had lifted rates by more than 20 per cent for home cover and car cover by more than 15 per cent. Some are even higher with IAG sending out renewal notices for car cover this month of more than 20 per cent, after loyalty and no-claims bonuses.
IAG last financial year made an $803 million profit, with insurance margins at 9.6 per cent. The insurer predicted in August that profits would hit between $1.2 billion and $1.45 billion for this financial year, with a margin of between 13.5
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