IAG 'increasingly confident' on intermediated profit target

IAG says its intermediated division is on track to achieve a $250 million profit target as premium increases flow through and financial year first-half progress points to improvements in the business.

Intermediated Insurance Australia reported a first half insurance profit of $49 million compared to a year-earlier loss of $4 million, partly reflecting lower natural perils costs.

The company has taken action to rejuvenate the previously loss-making intermediated business and has flagged that the division should reach the $250 million ambition by fiscal 2024.

“That is a prize that we are going after and we are increasingly confident that we are going to deliver,” IAG CEO Nick Hawkins told the company’s half-year earnings briefing on Monday.

The division’s underlying margin improved slightly to 5.7% in the December half from 5% a year earlier, buoyed by underwriting performance and an uplift in investment returns.

Mr Hawkins said premium increases already taking effect in response to accelerating inflation in the first half would continue flowing through, as is also being seen in the direct business.

“We would expect to see an uplift in that margin in the second half, and then that’s setting ourselves up for delivery against the $250 million in FY24,” he said.

The intermediated division includes commercial insurance sold under the CGU and WFI brands as well as personal cover provided mainly through broker and partner channels, such as retailers and financial institutions.

Gross written premium (GWP) grew 7.8% to $2.3 billion, representing 32% of group GWP, with the headline growth impacted by a HBF transfer and portfolio exits including IAL Steadfast.

Commercial short-tail GWP grew 13.4% to $1.17 billion and long-tail 15.6% to $547 million, while personal fell 7.1% to $588 million.

IAG says commercial SME packages achieved mid-single digit rate increases with double-digit changes achieved in a number of CGU lines, including property, construction and engineering and country packages.

Double-digit rate increases have also been put through to counter elevated claims inflation across professional risk and liability classes, with retention levels holding steady.

Looking ahead, the business will benefit from a long-term distribution agreement, effective from July, for CGU to provide ANZ banking customers with home, landlord and motor insurance products.