IAG shares slide 7% as annual cash earnings miss estimates

Insurance Australia Group (IAG) saw its shares plunge more than 7% on Thursday after reporting full-year cash earnings that fell short of market expectations. The country's largest general insurer attributed the shortfall to elevated costs from natural disasters and a decline in investment income.

For the year ended June 30, IAG posted cash earnings of A$1.03 billion, a 12.6% drop from the previous year and below the Visible Alpha consensus estimate of A$1.07 billion. The disappointing result triggered a sharp sell-off, with shares falling as much as 7.3% to A$7.63 in early trading — the steepest intraday decline since April 2025.

The company said it handled 65 severe weather events in Australia and 44 in New Zealand during the year. Net claims expenses rose 8% to A$6.84 billion, outpacing the 5% growth in net earned premium to A$10.52 billion. This pushed the loss ratio — the share of earned premium consumed by claims — up 160 basis points to 65.0%.

Underlying insurance margin, which excludes volatile items, slipped 50 basis points to 15.0%, just below the Visible Alpha consensus of 15.5%. Analysts at Citi noted the margin miss was driven by a "slightly disappointing" performance in IAG's intermediated insurance businesses in Australia and New Zealand.

Despite the weak earnings, IAG offered an upbeat outlook for financial year 2027, forecasting gross written premium growth of 5% to 8% — above the Visible Alpha estimate of 3.6%. The company expects premium increases to cover claims inflation and volume growth. Gross written premium for 2026 grew 7.6% to A$18.41 billion.

Total net investment income for the year fell to A$629 million from A$867 million a year earlier. The insurer declared a final dividend of 20 Australian cents per share, up from 19 cents last year.