Insurance Australia Group Ltd (ASX:IAG (LON:ICAG)) has delighted its shareholders by announcing a significantly higher final dividend for FY24, reflecting the company’s robust financial performance. The insurance giant reported a net profit after tax (NPAT) of AU$898 million for the fiscal year, a 7.9% increase from FY23. As a result, IAG shares will pay a final dividend of 17 cents per share with 50% franking, representing an 89% increase from the previous year’s final dividend of 9 cents per share with 30% franking.
A Closer Look at IAG's Impressive Dividend Growth
The announcement of the final dividend brings IAG’s total dividend for the year to 27 cents per share, up from 15 cents in FY23. Based on Thursday’s closing price of AU$7.35, this results in an annual dividend yield of 3.67% plus partial franking, making IAG an attractive option for income-focused investors.
For those looking to capitalize on this latest dividend, the ex-dividend date is fast approaching. ASX investors must purchase IAG shares by Wednesday, 28 August, to be eligible for the 17-cent final dividend, which will be paid out on 26 September.
Strong Financials Underpin Dividend Increase
IAG’s FY24 results, released on Wednesday, highlight the company’s strong recovery in the post-COVID era. The insurance division saw a remarkable 79.1% increase in profits, reaching AU$1.44 billion. This growth was driven by an 11% rise in net earned premiums and an improved insurance margin of 15.6%, up from 9.6% in the previous year. Additionally, IAG’s investment income on shareholder funds increased by 35% to $286 million, further contributing to the NPAT boost.
IAG’s ability to thrive in an inflationary environment has been a key factor in its success. As many consumers view insurance as a non-negotiable expense, they have been willing to pay higher premiums despite rising cost-of-living pressures. This trend has allowed IAG to maintain strong profitability and deliver substantial returns to shareholders.
Strategic Initiatives Drive IAG's Resilience
IAG’s Managing Director and CEO, Nick Hawkins, credited the company’s strategic initiatives for its strong performance. Hawkins highlighted the streamlining of IAG’s Australian business, the establishment of a clear brand strategy, and the national launch of NRMA Insurance outside of Victoria as key factors in the company’s success.
“We’ve also improved our claims management capability to ensure we are well placed to support our customers when they need us the most,” Hawkins added, underscoring IAG’s commitment to customer service and operational excellence.
IAG Share Price Outlook
The IAG share price has seen a substantial rise of approximately 60% over the past two years, reflecting the company’s strong financial performance and strategic initiatives. In the week leading up to the release of its FY24 results, IAG shares hit a new 52-week high of AU$7.49.
Despite the strong performance, Goldman Sachs (NYSE:GS) has maintained a neutral rating on IAG with a 12-month share price target of AU$7.20. This suggests that while IAG’s current valuation is favorable, the market may have already priced in much of the company’s recent success.