IAG said that its catastrophe claims, including wildfires and hailstorms, had increased from an initial estimate of A$641m to A$904m
Insurance Australia Group (IAG) has reported a net profit after tax of A$435m ($311.7m) for the financial year 2020, a 59.6% decrease compared to A$1.07bn ($771m) for the previous year.
The gross written premium for the period stood at A$12.13bn ($870m), increasing slightly by 1.1% from A$12bn ($860m) for the last year’s corresponding period.
The gross earned premium had increased from A$11.94bn ($8.56bn) in the financial year 2019 to $12.16bn ($8.72bn) in 2020.
Reinsurance expenses for the period had increased from last year’s A$4.7bn ($3.37bn) to A$4.8bn ($3.44bn) for the current year.
Net claims expenses had increased from A$4.61bn ($3.3bn) in the last year to A$5bn ($3.58bn) this year. Other expenses such as commission expenses and underwriting expenses had remained stable during the period.
The underwriting profit had plummeted from A$903m ($646.6m) to A$596m ($427m) for this year.
Insurance profit for the period stood at A$741m ($531m), falling from A$1.22bn ($873.6m) from last year.
IAG attributed the fall in underlying profit to Covid-19 impact and to the catastrophic natural peril events including the bushfires across the country, followed by hailstorms across Canterbury, Melbourne, the ACT and Sydney.
The company further stated that the catastrophic events had brought their claims costs to A$904m ($647.3m), which increased from their guidance of A$850m ($608.6m), a revise from the original allowance of A$641m ($459m), an increase of A$263m ($188.3m).
Profit before income tax and amortisation had fallen by 59.3%
The profit before income tax and amortisation for the current year period was A$565m ($404.6m), falling 59.3% from last year’s corresponding period of A$1.39bn ($995.4m).
IAG managing director and CEO Peter Harmer said: “Our top-line GWP growth was in line with our guidance, despite incurring a slightly negative effect from Covid-19 in the second half from lower new business volumes.
“Our FY20 reported margin of 10.1% fell outside our guidance of 12.5-14.5% due to the higher than expected level of natural peril events, a strengthening of our reserves mainly in the liability, professional risks and workers’ compensation areas, and credit spread effects. Covid -19 impacts on our underwriting profit largely offset each other.
“Our underlying margin was 16.0% (FY19: 16.6%), impacted by a softer second half owing to higher reinsurance costs, lower interest rates continuing to impact investment income, and a poorer performance from our commercial long-tail classes in Australia. The year also saw us successfully exit our investment in India, realising a post-tax profit of $326 million.”