Australian insurer IAG net loss resulted from one-off factors: analyst

The company’s preliminary FY 2021 results predict a A$427m net loss.

Insurance Australia Group Ltd. (IAG) will suffer a A$427m ($314m) net loss according to the company’s preliminary financial year (FY) 2021 results.

This was the opposite result from FY 2020 which saw a net profit of A$435m ($319.89m)

However, this fiscal loss is a result of one-off factors, according to analyst S&P Global Rating. The ratings and analytics firm said the FY 2021 net loss does not detract from their opinion that IAG has a solid underlying business performance.

“The expected full-year net loss at IAG is more than A$200m ($147.07m) worse than our published forecast earlier in the year. However, the loss is largely from unusual items such as increased corporate expenses for customer refunds and payroll compliance provisions and impairment on the announced sale of its insurance holding in Malaysia. Together, these and other nominal items total an additional expense of around A$234m ($172.08m) for the second half of fiscal 2021,” S&P said.

IAG also added A$1.15b ($850m) to the net corporate expense line for business interruption claims

“Within our expectations are continued low single-digit top-line growth, ongoing premium rate increases—Australia is reporting among the highest rate increases globally according to Swiss Re-sigma research—and the turnaround in investment markets, all contributing to a return to profit in the second half. Natural peril claims costs for fiscal 2021 are creeping up to A$742 million with recent storm activity, and the allowance for fiscal 2022 is higher again at A$765m, but largely to offset reductions in reinsurance cover for the year,” S&P added.