IAG posts 87.2% combined ratio following benign FY25 cat experience

By Rebecca Delaney

Aug 13 - (The Insurer) - Australian carrier IAG's combined ratio improved by 2.1 percentage points to 87.2% for the 2025 financial year, driven by a relatively benign natural catastrophe experience during the period.

On Wednesday, IAG reported net profit after tax of A$1.36 billion ($889.62 million) for FY25, up 51.3% from A$898 million in the prior year.

The group attributed this to an 8% rise in net earned premiums to A$9.98 billion and a 21.2% increase in insurance profit to A$1.74 billion, as well as an increase in investment income on shareholder funds of A$403 million and pre-tax releases of A$330 million from the business interruption provision.

Natural perils costs of A$1.09 billion were A$195 million below allowance, as disclosed last month.

IAG highlighted a "favourable" perils experience in 1H25, with costs in the second half of the year broadly in line with allowance (described as "adverse" in Australia and "benign" in New Zealand).

This included losses of around A$100 million from the Mid North Coast and Hunter floods across New South Wales in May 2025.

IAG reported non-quota share reinsurance expense of A$1.16 billion for FY25.

The carrier has a perils allowance of A$1.32 billion for FY26, with the 3% increase reflecting growth in aggregate exposure, in line with attachment point for perils volatility cover.

IAG EYES 'LOW-TO-MID SINGLE DIGIT' GROWTH IN FY26

The group reported a 4.3% uptick in gross written premium to A$17.12 billion in FY25, with underlying growth of 7.3% in the Australian retail insurance unit driven by direct business.

In domestic intermediated insurance, GWP increased by 6.3%, driven by increases in both personal lines (11.7%) and commercial long-tail (10.6%).

IAG's New Zealand unit reported retail GWP growth of 3.8%, with a strong reported insurance margin of 29.6% following the benign perils experience. Intermediated GWP was down 4.0% owing to a softening in the commercial market.

The insurer projected "low-to-mid single digit" GWP growth for FY26. IAG said this reflects premium increases that cover moderating claims inflation combined with direct customer and volume growth.

The group is targeting a reported insurance profit between A$1.45 billion and A$1.65 billion for FY26, roughly equating to a reported insurance margin of 14.0% to 16.0%. IAG noted that this assumes a natural perils allowance of A$1.32 billion, as well as no material prior period reserve releases or strengthening.

The FY26 guidance does not include the benefit of the Royal Automobile Club of Queensland and The Royal Automobile Club of Western Australia acquisitions. The former is expected to complete on September 1, which will result in GWP growth increasing to approximately 10%.