'Tale of two halves': IAG reports 60% profit fall as weather, pandemic bite
Insurance Australia Group has reported a dramatic fall in net profit after tax for the year, caused by the catastrophic weather events over the summer and pandemic-induced investment losses in the second half.
IAG also confirmed it will not pay shareholders a final dividend for the first time since the company was listed in 2000, after flagging the bad news for investors last month.
The business behind insurance brands including NRMA and CGU on Friday reported its net profit after tax was $435 million for the financial year, falling by 59.6 per cent since the corresponding period last year.
IAG chief executive Peter Harmer said catastrophic weather events and the pandemic in the second half had undermined the company's bottom line.Credit:Anthony Johnson
The insurer said the financial year was a "tale of two distinct halves" as its operating performance for the first half was strong and broadly in-line with expectations but the catastrophic weather events and the pandemic in the second half had undermined the company's bottom line.
The group's insurance profit was down by 39.5 per cent to $741 million, impacted by higher reinsurance costs and greater claims payouts after the summer bushfires and hail storms across NSW, Victoria and Canberra.
IAG reported it paid $904 million in natural perils claims, exceeding its revised guidance of $850 million and original allowance of $641 million, and chief executive Peter Harmer called for greater action on climate change, saying there was no doubt severe weather was negatively impacting the business.
"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," Mr Harmer said.
The insurer's sliding profits were made worse by a "relatively severe hit" to investment income as a result of volatile market conditions brought on by the coronavirus pandemic, compounded by the historically low interest rate environment.
The sale of IAG's Indian business for $326 million meant it was able to claw back some profits but these gains were largely set back by a higher than expected customer remediation bill of $141 million, compared to the $82 million set aside in the first half of the year.