IAG announces FY20 results
07 Aug 2020
IAG has released its results for the financial year ended 30 June 2020.
“Our top line GWP growth was in line with our guidance, despite incurring a slight 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.
This was partially offset by our customer refunds provision of $141 million for the full year compared to an initial $82 million recognised in 1H20. This relates to a number of multi-year pricing issues we identified where some customers did not always receive the full discounts they were entitled to.
We have addressed the underlying cause of the identified issues and have recently started to refund affected customers.
The year also included a relatively severe hit to our investment income, reflecting the volatile market conditions.
Natural perils update
The catastrophic natural peril events we saw over the year had a profound impact on our customers and communities – with the terrible bushfires that swept through Australia, followed by hailstorms in Canterbury and then Melbourne, the ACT and Sydney.
It’s been a critical time for our customers, and we responded quickly to each event – increasing the number of people in our customer contact centres and in our claims and repair teams to help customers recover as quickly as possible.
The high level of natural peril activity over the year underscores the importance of climate action, and the mitigation of its effects, to help make our communities safer, and we continue to advocate for businesses, government and communities to work together on this important issue.
The severe natural peril events have of course had a financial impact on our business and in the final quarter, a number of smaller ‘attritional’ natural perils brought our net natural perils claim costs to $904 million, exceeding our revised guidance of $850 million and original allowance of $641 million.
As we moved into 2020, we prepared for the impact of yet another disaster to confront our communities: COVID-19. We immediately prioritised the wellbeing of our people so they could continue to meet the needs of our customers.
We knew this wasn’t a normal crisis, so we set up a COVID-19 team to coordinate our response. Our people were asked to work from home where possible and it’s a credit to our technology team that 98%, or 13,300, were doing so by the end of March.
Our customer service levels held steady. We saw an encouraging lift in productivity, energy and engagement across our teams as we worked to support customers and each other.
We introduced measures to support customers and suppliers – focusing on people and businesses suffering hardship as a result of the pandemic.
Over the past four years, our strategy has been to simplify and optimise our core insurance business while creating future growth opportunities. We will continue to shift our focus towards customer-led growth – leveraging our data, customer reach and brands to enhance our core insurance business.
The COVID-19 pandemic has accelerated customers’ adoption of digital channels and we are assessing the opportunities this presents to build on our existing strategy.
We face the future with the confidence that we have a resilient business and we are well-equipped to rise to the challenges presented by the current environment, as well as the opportunities we see in a post-COVID-19 world.”