IAG Readies Asia Exit As H1 Profit Rises 24%
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Insurance Australia Group (IAG) has lifted interim dividend after a sharp improvement in its insurance margin and interim earnings.
While hurricanes, managerial instability and problems have crippled IAG’s local rival, QBE repeatedly in the US and South America in recent years, apart from local storms and the NZ earthquakes back in 20110-11, IAG has mostly avoided following those potholes of financial underperformance or worse, great big losses.
Yesterday it slipped in a $50 million write down (nowhere as big as the billion plus announced by QBE in last month, and next week) as it prepares to pull the plug on its modest Asian empire and expansion plans.
The country’s largest general insurer said yesterday first-half insurance profit rose 23.5% to $551 million helped by rate increases in commercial and consumer lines, and some volume growth in its motor vehicle division.
The result was up from $446 million from the year before
Investors ignored the write down and pushed the shares up 3.1% to $7.50.
Revenue also rose 1.1% from the year-earlier period to $8.27 billion and IAG has revised higher its full-year reported margin guidance to 15.5% – 17.5% based on a positive revision to expected reserve releases.
The first half saw the insurance margin jump to 17.3% from 13.5% for the first half of 2016-17. That is why earnings rose sharply and why the company could take the Asian write down without damaging profit growth.
Australia’s largest insurer by market share saw its gross written premium grow by 0.6% to $5.83 billion and reaffirmed a "low single digit" GWP growth expectation.
It also signalled that it is looking to pull out of its small Asian operations, unveiling a “strategic review” which could see it sell off these businesses after it said there were “limited” opportunities for growth.
The results also included a $50 million write-down following a review of the value of its Asian businesses. “We have always taken a measured approach to Asia and we believe this is the right time to review the immediate and longer term strategic options for our individual Asian businesses given the limited expansion opportunities,” said CEO Peter Harmer.
IAG has businesses in Thailand, Vietnam, Indonesia, Malaysia and India, which collectively make up just 3% of the group’s gross written premium of nearly $12 billion a year.
Interim dividend was raised by a modest one cents to 14 cents a share, so there’s no largesse at IAG so far as rewarding shareholders. It was a dividend rise more in keeping with a far more modest result.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.