Insurer IAG outlined a wave of price rises across its whole portfolio and even its CEO said he’s never seen the industry reprice so aggressively.
IAG stuck by guidance for this financial year of insurance margins hitting 10 per cent. That came despite speculation it would have to downgrade margins after the double whammy of disasters in New Zealand, and pressure from two previous guidance misses.
IAG is aiming for medium-term margins of 15 per cent, the lower end of targeted ranges of 15 per cent to 17 per cent. Yet Mr Hawkins also argued that returns on equity should improve by 1 percentage point to between 13 per cent and 14 per cent over the medium term, due to better investment returns and premium growth.The latest Australian price rises were implemented in February. Mr Hawkins said equivalent home insurance price jumps had occurred after flooding and earthquakes in 2010 and 2011.
IAG also flagged it would hit a target of $2.5 billion in gross operating costs for this year. This level may increase next year due to “ongoing inflationary pressures and additional technology investments”, IAG said. Still, it argued a ratio of underwriting expenses to premiums would remain flat or reduce.
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