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Results: Insurance Australia Group Ltd cash profit falls 10%

Tom Richardson
worried looking man in business suit

This morning Insurance Australia Group Ltd (ASX: IAG) reported its results for the financial year ending June 30, 2019. Below is a summary of the report with comparisons to the prior year. 

  • Gross written premium (GWP) $12,005m, up 3.1%
  • Net profit $1,076m, up 16.6% (includes $200m profit on sales of Thailand operations)
  • Insurance profit $1,224m, down 13%
  • Underlying insurance profit margin 16.6%, up 2.5%
  • Cash earnings $931m, down 10%
  • Final dividend 20cps, full year dividends 32cps, down 5.9%
  • Return on equity 14.4%, down 1.2%
  • CET1 capital multiple 1.31, up 5bps, compared to a regulatory requirement of 0.6 times
  • FY 20 guidance for “low-single-digit” GWP growth 

The IAG share price is 3.3% lower to $7.81 on the back of a marginal cash earnings miss versus consensus forecasts.

IAG has been working on simplifying its business and pulling out costs via restructures like other large-cap insurers including Suncorp Group Ltd (ASX: SUN) and QBE Insurance Group Ltd (ASX: QBE), with it reporting $90 million in cost savings via its “optimisation program” over the course of the year. This was partly offset by an additional $20 million in regulatory costs.

IAG also still has reinsurance and financing agreements with Warren Buffett’s legendary insurance and investment conglomerate Berkshire Hathaway to help it manage capital adequacy backing and risk. 

The stock is down around 6% over the past 52-weeks, although once you adjust for ordinary and special dividend payouts over the financial year it’s closer to flat.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of Insurance Australia Group Limited. The Motley Fool's parent company may owns shares in or recommend Berkshire Hathaway. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019