IAG share price drops despite ‘strong momentum’ for FY23

A man wearing a blue jumper and a hat looks at his laptop with a distressed and fearful look on his face as he reads about the Core Lithium share price falling 30% in a monthA man wearing a blue jumper and a hat looks at his laptop with a distressed and fearful look on his face as he reads about the Core Lithium share price falling 30% in a month

The Insurance Australia Group Ltd (ASX: IAG) share price is currently down 1.87% to $4.19 after the insurance giant reported its preliminary FY22 results and revealed guidance for FY23.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is currently up 0.2%.

FY22 result

The prelim results have failed to impress investors, judging by the IAG share price. So let’s have a quick recap of what the company reported.

IAG revealed a reported insurance profit of $586 million, representing a margin of 7.4%, down from 13.5% in FY21, and below the FY22 guidance range of between 10% to 12%.

This included a net perils cost of $1.1 billion, $354 million above the original allowance of $765 million, though it was consistent with the expectations announced in March 2022.

IAG told investors about a reported net profit after tax (NPAT) of $347 million, up from a $427 million loss in FY21.

It included a $200 million pre-tax release from the business interruption provision but also included a “challenging operating environment” with a high incidence of natural perils, volatile investment markets and a higher inflationary environment.

Gross written premium growth was 5.7%, up from 3.8% in FY21.

The full-year announcement will be revealed on 12 August.

FY23 guidance

IAG said that “strong underlying business momentum” is reflected in its guidance for FY23. Expectations about the next 12 months can have an impact on the IAG share price.

Gross written premiums (GWP) are expected to again grow in the “mid to high” single digits, primarily driven by cover claims inflation, higher reinsurance costs, and an increased natural peril allowance. Modest volume growth and an increase in customer numbers are also expected.

The natural peril allowance is increased to $909 million, post quota-share. That’s an increase of around 19% on the FY22 allowance.

IAG share price snapshot

Since the start of 2022, the IAG share price has fallen by 6%.

It is also down by more than 13% over the past year and 2% over the past month.

The post IAG share price drops despite ‘strong momentum’ for FY23 appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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