Highlights

  • Insurance Australia Group (ASX:IAG) reported FY26 gross Written Premium growth of 7.6% to $18.412 billion.
  • Underlying insurance profit increased to $1.578 billion, while reported profit declined due to higher natural peril costs.
  • The company increased its full-year Dividend to 32.0 cents per share and completed a $200 million buyback.
  • Investors are monitoring FY27 Margin guidance, catastrophe experience and RACQ Insurance integration.

Insurance Australia Group (ASX:IAG) delivered a mixed FY26 result, with strong premium growth and improved underlying insurance performance offset by higher natural catastrophe costs and a decline in reported profit.

The company’s result highlighted the challenge for large insurers of balancing pricing growth, claims Inflation and catastrophe exposure. While the core insurance Business remained resilient, the market focused on the impact of weather-related claims and whether recent margin improvements can be sustained.

For investors, the focus has shifted towards FY27 execution, including insurance margin delivery, claims trends and the benefits expected from the RACQ Insurance acquisition.

Key Development

IAG reported its FY26 financial results for the year ended 30 June 2026, with gross written premium (GWP) increasing 7.6% to $18.412 billion compared with $17.106 billion in FY25.

However, reported net profit after tax declined to $1.022 billion from $1.359 billion in FY25.

The decline reflected a higher natural peril impact compared with the previous year, which benefited from favourable peril experience and a business interruption provision release.

The company reported that FY26 included an unfavourable natural peril impact of $114 million, compared with a favourable $195 million impact in FY25.

The result also reflected the first full-year contribution from RACQ Insurance, which supported premium growth but added transitional impacts during integration.

The market reaction focused on the difference between stronger underlying operations and weaker headline profit.

Financial Performance

IAG’s underlying insurance performance remained resilient during FY26.

Underlying insurance profit increased to $1.578 billion from $1.542 billion in FY25.

The underlying insurance margin was 15.0%, down 50 basis points from the prior year. The decline reflected improved underlying claims and expense ratios, offset by a higher perils allowance, RACQ Insurance transition impacts and lower Investment yields on technical reserves.

Excluding the one-off RACQ Insurance impact, the underlying insurance margin was 16.0%.

Reported insurance profit declined to $1.552 billion from $1.743 billion in FY25.

Natural catastrophe costs were a major Earnings factor. Claims from natural events totalled $1.579 billion, compared with a FY26 allowance of $1.465 billion, creating an adverse variance of $114 million.

Segment performance showed mixed trends:

  • Australian Retail GWP increased 17.8% to $10.308 billion, including $1.272 billion from RACQ Insurance. Underlying growth was approximately 4.5%.
  • Australian Intermediated GWP increased 1.1% to $4.600 billion, with underlying growth of approximately 2%.
  • New Zealand GWP declined 8.0% to $3.504 billion due to currency impacts and softer market conditions. In local currency terms, GWP declined 2.7% to NZ$4.060 billion.

IAG continued returning Capital to shareholders, completing a $200 million on-market buyback during FY26.

The company increased its final dividend to 20.0 cents per share from 19.0 cents, taking the full-year dividend to 32.0 cents per share compared with 31.0 cents in FY25. Dividend franking increased to 80%.

Management View

Managing director and chief executive Nick Hawkins described FY26 as a year of strategic execution, highlighting progress across the company’s Ambition 2030 strategy.

Management pointed to premium growth, improved underlying margins, technology investment and the integration of RACQ Insurance as important developments.

The company also highlighted its response to severe weather events during FY26, including support for customers affected by natural disasters.

For FY27, IAG expects gross written premium growth of 5% to 8% and a reported insurance margin of 14.5% to 16.5%.

The company has also expanded its Reinsurance protection, which is expected to improve earnings resilience against significant catastrophe events.

Investor Focus

Investor attention following the FY26 result has centred on the sustainability of insurance margins.

The company has benefited from stronger pricing conditions across the insurance market in recent years, but investors are assessing whether those conditions can continue while claims costs remain elevated.

The RACQ Insurance Acquisition remains another important area of focus. While it supported premium growth, investors are monitoring whether integration benefits translate into improved earnings.

Capital management also remains relevant, with IAG maintaining dividend growth and completing share buybacks.

Future Catalysts

The key catalyst for IAG will be delivery against FY27 guidance.

Investors will monitor whether the company can achieve GWP growth of 5% to 8% and maintain its reported insurance margin within the targeted 14.5% to 16.5% range.

The realised benefit from expanded reinsurance protection, improving claims trends and RACQ Insurance integration will be important factors.

A more favourable catastrophe environment could also support earnings improvement.

Further capital returns and progress towards long-term strategic targets may influence investor sentiment.

Key Risks

Natural catastrophe exposure remains the primary risk for IAG, as severe weather events can significantly affect annual profitability.

Claims inflation across motor and home insurance remains another challenge, particularly if cost increases outpace premium adjustments.

Integration risks associated with RACQ Insurance could affect expected benefits.

Higher reinsurance costs, regulatory requirements and changing customer behaviour may also influence future margins.

Broader economic conditions and investor sentiment towards financial stocks remain additional factors affecting valuation.

Investor Takeaway

Insurance Australia Group (ASX:IAG) delivered a FY26 result where underlying performance remained stable despite pressure from catastrophe costs and lower reported profit.

The company achieved strong premium growth, increased underlying insurance profit to $1.578 billion and maintained Shareholder returns through a higher dividend and buyback program.

The key areas for investors to monitor are FY27 margin delivery, catastrophe experience, RACQ Insurance integration and continued capital management.

While IAG retains a strong position in Australian general insurance, future performance will depend on maintaining Underwriting discipline and managing claims volatility.