By Alice Uribe
SYDNEY--Insurance Australia Group Ltd. posted a net loss for the 2021 fiscal year, driven by significant one-off expenses mainly relating to business interruption, customer refunds and payroll remediation.
The general insurance company recorded a net loss of 427 million Australian dollars (US$313.8 million) for the 12 months through June, compared to a A$435 million profit a year earlier.
Chief Executive Nick Hawkins said the one-off expenses that had dragged down its annual profit were historical issues which had been provisioned for, while the insurer was making investments to lift its risk management and operational capabilities.
A pretax charge of A$1.15 billion for business interruption claims remained unchanged from the first half of fiscal 2021.
Cash earnings at IAG, a measure tracked by analysts that excludes certain costs and one-time items, rose to A$747 million from A$279 million a year earlier.
"Our fiscal 2021 business performance is sound and reflects the strength of our core insurance business and its market leading brands," said Mr. Hawkins. "Our Australian and New Zealand direct businesses have generated solid growth, and we've enhanced our focus on our intermediated business in Australia to resolve the challenges we've seen with some of its portfolios, and to drive greater profitability."
A 3.8% gross written premium increase to A$12.60 billion was primarily driven by strong rates, said IAG, noting that it had also seen new business growth and stronger customer retention.
The insurer's insurance profit for fiscal 2021 rose 36% to A$1.01 billion, which IAG attributed to lower natural perils costs, positive credit spreads and a first half Covid-19 benefit mainly from lower motor claims in Australia.
IAG said its underlying insurance margin of 14.7%, which was down from 16.0% on year, was within expectations. Its reported insurance margin of 13.5% improved from 10.1% a year ago, due to the strength of its reported insurance profit.
Directors of the company declared a final dividend of A$0.13 cents a share, having suspended its payout a year ago. The final dividend takes IAG's payout ratio to 66% based on full-year cash earnings, it said.
The insurer pre-announced its results on July 23, and reintroduced guidance for the coming 12 months citing confidence in the business and its outlook.
For the 2022 fiscal year, IAG forecasts "low single-digit" gross written premium growth, and a reported insurance margin of 13.5-15.5%.
"The fiscal 2022 guidance aligns to IAG's aspirational goal to achieve a 15-17% insurance margin over the medium term," said IAG.
"This goal encompasses organic direct customer growth that at least matches the market in Direct Insurance Australia and New Zealand, an insurance profit of at least A$250 million over the next three to five years for Intermediated Insurance Australia and delivering further simplification and efficiencies in the cost structure of the company over the next three years," it said.
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(END) Dow Jones Newswires
August 10, 2021 19:34 ET (23:34 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.