Company Interview / How IAG is weathering the insurance storm

Key points:

IAG (ASX:IAG) reports 35% first half profit drop, cites claims costs and investment incomeUnderlying insurance profit climbs 7.6% to $804 millionInterim dividend maintained; $200 million share buyback announcedCost reductions, customer retention, and growth in Australia and New Zealand flagged as ongoing strengths

Insurance Australia Group (ASX:IAG) has reported a 35% fall in first half profit, posting a net profit after tax of $505 million. CFO William McDonnell notes this decline reflects increased claims expenses, lower investment income, and a $174 million one-off weather-related impact after the acquisition of RACQ. Despite these challenges, McDonnell states that underlying insurance profit rose by 7.6% to $804 million, backed by strong capital and robust reinsurance protections. Shareholders are set to receive an interim dividend of $0.12 per share, franked to 25%, and IAG has announced an on-market share buyback of up to $200 million.

McDonnell points to IAG’s guidance of high single-digit gross written premium (GWP) growth for the full year, a revised figure from earlier double-digit projections due to ongoing natural peril events. The company expects profit for full year 26 to be at the lower end of guidance, with natural perils costs anticipated around $1.6 billion. McDonnell highlights IAG’s comprehensive reinsurance program as giving confidence to both earnings and the ability to fund acquisitions organically.

Turning to operational improvements, McDonnell emphasises ongoing cost reduction, with the administration expense ratio expected to fall below 11% next year, driven by technology upgrades and AI-driven efficiencies. He also cites strong customer retention, new acquisition ambitions, and continued resilience across IAG’s retail and commercial businesses.