Lower-than-expected natural peril claims have boosted Insurance Australia Group’s financial performance.
Lower-than-expected natural disaster costs have helped Insurance Australia Group exceed its own performance forecasts.
The company behind NRMA Insurance and CGU incurred $555 million in costs from natural perils in the year to June 30, well below the $640 million it had budgeted for.
The second half of the financial year was particularly quiet, IAG said, after a first half that included devastating bushfires in the NSW Blue Mountains and storms in NSW and Queensland.
As a result, IAG expects its insurance margin – a measure of the profit it makes on insurance writing – to be between 18 and 18.4 per cent.
That is well above its previous forecast of between 14.5 and 16.5 per cent.
“This reflects the relatively benign natural peril activity in the second half of the financial year, notably in Australia, and a more favourable financial impact from narrower credit spreads than previously anticipated,” chief executive Mike Wilkins said.
The insurer will report its finalised full year results in August, and an insurance margin within its new expectations would be IAG’s highest since going public in 2000.
IAG made a net profit of $776 million in 2012/13, when it achieved an insurance margin of 17.2 per cent.
Its shares rose on the improved performance, up 13 cents to $6.17 at 1533 AEST.
Local rival Suncorp also benefited, adding 21.5 cents to $14.045.
IAG also said written premiums grew by about three per cent for the year, which is at the bottom end of its forecast range of three to five per cent.
It expects its full year accounts will include $70 million in one-off costs from its recent $1.85 billion purchase of Wesfarmers’ insurance underwriting business and improvements to its Australian operations.
But IAG has also increased the size of its expected associated cost benefits in the next two years.