Insurance Australia Group provided a market update as it dealt with the impact of late January’s floods across the North Island.

IAG expects its first-half profit after tax to be A$468 million, while gross written premiums are expected to grow by 10%.

“Our strong top-line growth over the half reflects significant premium increases and new customer growth,” Nick Hawkins chief executive, said.

“Premium rates continue to increase in response to claims inflation and in anticipation of additional reinsurance and natural perils costs.”

Natural perils costs for 1H23 are expected to rise to A$524 million, A$70 million higher than the allowance for the period, according to IAG, due to the Auckland weather event.

IAG conducted an initial assessment of expected claims. Natural perils cost impact, net of reinsurance, would be at the $236 million retention level, it said.

“The Auckland event, combined with the escalation in supply chain inflation, has delayed our ability to fully demonstrate our strategic and operational progress in FY23,” Hawkins added.

IAG noted inflationary impacts, particularly in motor claims. Together with natural perils costs, the firm’s increased loss ratio would rise to 70.8%, up 2% from last year.

Hawkins anticipated "strong improvement in the underlying margin" during H2 and noted early indications that supply chain inflation impacts on claims costs had stabilised.

March 2023