We are pleased with the underlying financial results we are delivering today. Our FY21 business performance is sound and reflects the strength of our core insurance business and its market-leading brands.
The underlying margin of 14.7% (FY20: 16.0%) is within expectations and we’ve reinstated guidance for FY22, reflecting the confidence we have in our business and economic outlook.
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.
Our gross written premium (GWP) growth of 3.8%, was mainly rate driven, but we also saw promising new business growth and stronger customer retention. Our reported insurance profit of $1,007 million increased significantly over the year (FY20: $741 million) due mainly to lower natural perils costs, positive credit spreads and a first half COVID-19 benefit mainly from lower motor claims in Australia. This translated to an improved reported insurance margin of 13.5% (FY20: 10.1%).
Significant one-off corporate expenses mainly relating to business interruption, customer refunds and payroll remediation impacted our overall result, which was a net loss of $427 million (FY20: $435 million profit). These are historical issues we’ve identified, provisioned for and are fixing – and we are making investments to continue to lift our risk management and operational capabilities.
Our cash earnings, which exclude one-off items, increased to $747 million for the year (FY20: $279 million) – and we’re pleased to announce a final dividend of 13 cents per share which takes our payout ratio to 66% based on full year cash earnings.
Since becoming CEO in November, I have put in place a new, more customer aligned operating model, reset our strategy for growth, and appointed a leadership team with deep insurance and customer expertise, and clear accountability for success. We are already seeing results from these changes and have momentum behind our strategy.
This includes growing with our customers and during the year we increased customer numbers in our Australia and New Zealand direct insurance businesses, and we are expanding our premium NRMA Insurance brand across Australia.
Our strategic focus to build better businesses is underpinned by the work we are doing to set up our intermediated business to achieve double-digit insurance margins over the next three to five years, to deliver an insurance profit of at least $250 million per year3. We’re focused on upgrading the risk management and underwriting disciplines in that business and strengthening our relationships with broker partners to improve its profitability.
We’re creating value through digital by scaling up artificial intelligence and automation in motor claims to deliver better outcomes for customers. And we’ve developed a predictive loss technology for cars written off in an accident that is reducing the claims time for customers from weeks to days.
Actively managing risk is an ongoing priority, and our $100 million, multi-year risk management improvement program is significantly progressed and has strengthened risk controls across IAG.
Natural perils and COVID-19
A high number of extreme weather events has once again impacted our customers and their communities this year, and we were proud to be there for them in the moments that matter.
COVID-19 continues to affect us all, and we were pleased to continue customer support measures we introduced in 2020. More than 68,000 policyholders have taken up these measures which include premium reductions and deferrals.
Stronger, more resilient IAG
I’m confident that the strong leadership team I’ve established, the new organisational structure we have in place and the strategy we’re executing will deliver business and customer growth.
IAG is a company guided by a clear purpose ‘to make your world a safer place’ that makes a real difference to our customers and communities.
I’m focused on IAG’s long-term future, and together with my leadership team and our people, we will build a stronger, more resilient company.
IAG Managing Director and
Chief Executive Officer
For more information on our FY21 results visit our Results and Reports page.