Inflation, Rising Insurance Rate to Continue, IAG CEO Says – Interview & More Latest News Here – Up Jobs

By Alice Uribe

SYDNEY– Numerous rising inflation pressures which have prompted a surge in general insurance pricing are unlikely to abate over the next 12 months, according to Insurance Australia Group Ltd. Chief Executive Nick Hawkins.

    
The Australian general insurer said on Friday that it returned to an annual net profit, driven in part by strong gross written premium growth that was boosted by insurance rate increases. IAG reported a net profit of 347 million Australian dollars (US$246.6 million) for the 12 months through June, compared with a A$427 million loss a year earlier.
IAG said that through fiscal 2022, strong rate rises allowed the insurance company to counter inflationary pressures. For fiscal 2023, IAG said it expects ongoing rate increases in its short tail personal lines, including motor and home, in its direct insurance Australia unit. There would also be continued rate rises across commercial lines in its intermediated insurance Australia division, the insurer said.
“I don’t see inflation coming down. I see the current environment over the next 12 months being maintained and therefore that’s going to be reflected in pricing,” Mr. Hawkins told The Wall Street Journal.
This comes as IAG, and the wider insurance sector, faces a range of inflation challenges, including higher reinsurance, labor costs, and repair costs.
“We’re managing inflation in lots of ways…obviously we’re managing the cost base of how we run our company…We’re very focused on managing everything we can around the supply chain,” he said.
“But at the same time…we can shelter our customers a bit from some of that by what I’ve just described but that does need to flow through to pricing.”
S&P Global Ratings said in a note that IAG should benefit from the support of higher premium rates, which “should mitigate headwinds across claims inflation and perils during fiscal 2023.”
IAG on Friday also reported that fiscal 2022 was one of the most significant peril years it had experienced, with multiple events in Australia and New Zealand, including the February floods in northern New South Wales state and along the east coast.
IAG’s net perils for fiscal 2022 were A$1.12 billion, which was A$354 million above its allowance. To deal with the increasing severity and frequency of extreme weather events, IAG has put in place its largest perils allowance to date, increasing it by 19% to A$909 million for fiscal 2023.
Mr. Hawkins said that the higher-than-expected perils, along with tough investment markets, led to IAG cutting its final dividend to 5 Australian cents a share, from 13 Australian cents a share the previous year.
“We know that in FY 2022… we had a very tough perils year. With some of the volatility we saw in the investment markets, the actual returns of the company were down and that’s being reflected in the way we’ve paid our dividends to shareholders,” he said.
Cash earnings at IAG, a measure tracked by analysts that excludes certain costs and one-time items, fell to A$213 million from A$747 million a year earlier. IAG also said its reported insurance margin of 7.4% which was below its expectations due partly to higher natural perils costs.
Write to Alice Uribe at [email protected]

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