Investing.com - In Monday's fiscal update, Insurance Australia Group Ltd (ASX:IAG) reported a significant increase in its cash earnings for the financial year 2023. However, these figures fell short of market expectations, resulting in an early trading drop of 1.2% in share value.
The leading general insurance company revealed cash earnings reaching A$452 million ($290.00 million) as of June 30th this year - more than double from last year’s A$213 million. Yet it failed to meet analysts' predicted average estimate of A$656.7 million based on Refinitiv Eikon data.
Despite reporting lower-than-expected results, IAG (LON:ICAG) announced an increased final dividend payout at nine Australian cents per share compared to five cents last year.
Market experts from Citi expressed their disappointment about these outcomes and noted that the declared dividend was also below consensus.
Looking ahead into fiscal 2024, IAG anticipates modest growth in gross written premiums (GWP). This is due to expected increases in customer numbers responding positively to the company's commitment towards claims inflation coverage and managing escalated reinsurance costs and natural peril allowance considerations.
Matching Refinitiv estimates for FY23, GWP experienced a rise of approximately 10.6%, totaling A$14.73 billion ($9.4 billion).
UBS analysts commented favorably on IAG’s top-line guidance for FY24 GWP which exceeds consensus estimates between 8%-9%.
CEO Nick Hawkins expressed his confidence entering FY24 with positive momentum across all aspects of the business while assuring long-term benefits for shareholders and customers alike through strategic planning initiatives currently underway within the company.
Australian insurance companies have seen substantial profit increases this year thanks largely to higher premium rates within a high-interest rate environment coupled with investment income rebounds.
For FY24, IAG forecasts an improved insurance margin ranging between 13.5%–15.5%, noticeably up from last year’s 12.6%. Nevertheless, the surge in home and motor claim costs along with higher natural peril allowances has reportedly affected underlying insurance margins according to recent statements released by IAG.