Australian insurer IAG tumbles on rising claims expense, lower investment income

By Sameer Manekar, Sneha Kumar and Roshan Thomas

Feb 12 (Reuters) – Insurance Australia Group on Thursday reported rising claims expense and lower investment income that overshadowed a smaller-than-expected fall in first-half cash earnings, sending its shares tumbling to a 19-month low.

Australia’s top general insurer said cash earnings slipped 21% to A$507 million ($361.59 million) in the six months ended December 31 from last year’s A$640 million. However, that beat the Visible Alpha consensus estimate of A$464.7 million.

Net claims expense rose 15% to A$3.51 billion, although it was lower than the A$3.53 billion consensus. Investment income from shareholder funds slipped 14% to A$186 million.

“Various major hailstorms and severe weather events in October and November across south-east Queensland and northern NSW resulted in significant claims for insurers,” CEO Nick Hawkins said in a statement.

IAG maintained its fiscal 2026 reported insurance profit view at the lower end of its A$1.45-A$1.65 billion forecast range.

It marginally lowered its full-year gross written premiums growth view to high-single digits, compared with the prior expectation of a 10% rise.

Shares of the insurer dropped as much as 7% to A$6.780, their lowest point since late June 2024.

“The selloff reflects concern around weaker-than-expected top-line growth, with the market looking past the earnings beat and focusing on… and a downgrade to premium growth guidance,” said Marc Jocum, senior product and investment strategist at Global X ETFs.

“In this earnings season, that’s been enough to trigger a sharp repricing, as investors remain highly sensitive to any signs that pricing power and margins may be peaking.”

The insurer raised its annual natural peril costs assumption to A$1.62 billion from A$1.32 billion, reflecting higher costs in the recently acquired RACQ Insurance portfolio.

It reported natural perils costs of A$870 million for the first half, more than double that of last year, with around a quarter coming from the RACQ Insurance portfolio.

For the six months ended December 31, IAG reported gross written premiums of A$8.93 billion, 6% higher than last year. Net earned premium, which excludes reinsurance expenses, rose 8.5% to A$5.35 billion.

The Sydney-based insurer announced a fresh share buyback of up to A$200 million, citing a strong capital position.

It also announced an interim dividend of 12 Australian cents per share, the same as what it paid last year.

($1 = 1.4021 Australian dollars)

(Reporting by Sameer Manekar and Sneha Kumar in Bengaluru, additional reporting by Roshan Thomas; Editing by Vijay Kishore and Subhranshu Sahu)