Insurance Australia Group (ASX: IAG) $7.81

IAG -5.1%: Traded down as their FY26 result was a little softer than expected at the profit line, with cash earnings missing consensus and reported insurance margins lower year-on-year. However, the more important takeaway was the FY27 outlook, where premium growth guidance came in comfortably ahead of market expectations and management continues to target further improvement in returns.

Key results:

• Cash profit of A$1.03 billion, down 13% and around 3% below the A$1.06 billion expected.
• Gross written premium of A$18.41 billion, up 7.6% and broadly in line with expectations.
• Net earned premium of A$10.52 billion, below the A$10.85 billion expected.
• Reported insurance margin of 14.7%, broadly in line with the 14.8% expected.
• Underlying insurance margin of 15.0%, slightly ahead of the 14.9% expected.
• Final dividend of 20c per share, up from 19c.
• Cash ROE of 14.0%, down from 16.8%.

The softer cash result largely reflected higher reinsurance costs and weaker underlying insurance profitability than some had hoped for. The miss was particularly evident in New Zealand Intermediated, while RACQ is still in the early stages of contributing to group earnings.

The more encouraging part of the result was FY27 guidance. IAG expects 5–8% GWP growth, comfortably ahead of consensus around 3.6%, with the reported insurance margin expected to sit between 14.5% and 16.5%. Management also expects the full-year contribution from RACQ to support growth, while the natural peril allowance has been set at A$1.49 billion.

The strategic story is also becoming clearer. IAG’s 2030 ambitions include more than 11 million customers, over A$25 billion of premiums, ROE of at least 15%, and high-single-digit EPS growth. That gives the market a clearer framework for how management intends to turn recent acquisitions and scale benefits into stronger earnings growth.

MM’s view: The FY26 result itself was slightly disappointing, but the outlook was better. Premium growth guidance is stronger than the market expected, underlying margins remain healthy, and there is still upside as RACQ and other recent initiatives mature. The key from here is execution, particularly converting strong premium growth into sustainably higher earnings and returns.