Insurance Australia Group (IAG) has raised its performance targets for the full year after fewer natural disasters contributed to a sharp rise in its first half profit.
However the owner of NRMA Insurance has retained an element of caution due to January’s floods and bushfires, maintaining its assumption of full year natural peril costs of $620 million.
IAG made a net profit of $461 million in the six months to December 31, more than triple its $144 million profit in the previous corresponding period.
The company’s insurance profit of $815 million in the six months was also significantly higher, up from $271 million for the same period the previous year.
Chief executive Mike Wilkins said the results reflected a benign weather period in the half year, improving financial markets, and more efficient operations.
“This is a strong half year result and, based on the momentum in the business, we’re confident about our outlook,” Mr Wilkins said.
IAG now expects its full year insurance margin, a measure of profitability in its insurance operations, to be between 12.5 per cent and 14.5 per cent over the full 2012/13 financial year.
That’s an improvement from its previous guidance range of 11 per cent to 13 per cent.
IAG also expects growth in the premiums it writes of between 9.5 per cent and 11.5 per cent in the full year, up from its previous forecast of nine per cent to 11 per cent.
The insurer also more than doubled its interim dividend to 11 cents per share.
IAG shares were up 19.5 cents, or 3.6 per cent, at $5.62 at 1534 AEDT.
“All the stars aligned for IAG,” Morningstar analyst Ravi Reddy said.
“A strong business performance, a benign claims environment and favourable investment markets have seen IAG deliver a stellar first half result.”
Fellow insurer Suncorp on Wednesday posted a 48 per cent rise in its net profit for the six months to December.
IAG’s natural peril claim costs in the six months to December were $133 million, down 66 per cent from the previous corresponding period.
But it still assumes full year claims could rise to $620 million following floods and bushfires in January.
IAG estimates floods will cost it between $120 and $140 million, while bushfires could cost a further $35 million.
