IAG’s share price has jumped 15% after announcing its interim result. Gross written premium—the insurance industry’s key revenue measure—increased 9.7% to $4.3bn, due to a combination of premium increases, higher volumes and small acquisitions. In stark contrast, the underlying insurance profit fell 42% to $271m. Reinsurance costs increased 56% to $356m following the insurance industry’s record year of natural disaster induced payouts, floods in Thailand and the Christmas day storms in Melbourne caused a threefold increase in natural peril claims to $396m and wider credit spreads reduced profits by $80m.
The interim dividend was also cut to five cents (fully franked, ex date unknown), from nine cents. A sensible move given IAG must satisfy minimum regulatory capital standards while simultaneously acquiring new businesses.