Australian insurer IAG claims rising claims and third-party costs to drive up premiums

Insurance Australia Group said on Wednesday it expected premiums to continue rising due to huge increases in claims and third-party costs for home and motor repairs, sending its shares more than 3 per cent lower.

IAG said the money it earns from premiums for the 2025 fiscal year will rise by a “mid to high” single-digit percentage on the back of an increase in volume, mirroring the outlook that rival Suncorp shared earlier this week weeks.

Its shares fell as much as 3.2 percent to $7.2 and were set for their worst trading session since early August.

“We recognize that premium increases are affecting customers,” IAG CEO Nick Hawkins said, adding that the business was focused on reducing the impact.

IAG said labor costs and expenses associated with building materials rose during the year in the state of Victoria, where much of the workforce is unionized.

The insurance group reported net profit of $898 million ($605.43 million) for fiscal 2024, missing a Citi estimate of $1.05 billion.

IAG posted an annual net profit of $832 million last year.

Australian insurers have seen their profits rise over the past year as they wrote more premiums following extreme weather conditions and increased living costs. Their fixed income and equity investments have also benefited from high interest rates and market volatility.

IAG’s gross written premiums were $16.40 billion in fiscal 2024, up from $14.73 billion last year and in line with Visible Alpha’s consensus estimate of $16.42 billion.

The costs of his natural hazards were below the amount he had set aside for the fiscal.

The insurer declared a final dividend of 17 Australian cents per share.

($1 = 1.4826 Australian dollars)

(Reporting by Himanshi Akhand and Ayushman Ojha in Bengaluru; Editing by Shilpi Majumdar and Mrigank Dhaniwala)

Photo: Floodwater in Rochester, Victoria, Australia on January 9, 2024. Photo credit: Getty Images

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