Insurance Australia Group Limited (IAG) today announced a net profit after tax of $181 million for the 12 months ended 30 June 2009 (FY08: -$261m). Insurance profit increased to $515 million (FY08: $392m), representing an improved insurance margin of 7.1% (FY08: 5.4%) in line with revised guidance.
Gross written premium (GWP) increased from $7,793 million to $7,842 million. When excluding foreign exchange impacts and businesses divested or placed into run-off during the year, underlying GWP growth was 4%.
IAG Managing Director and CEO, Mr Michael Wilkins, said he was pleased the actions taken during the year were delivering results.
“The past year has been one of rebuilding for IAG. We refocused back on our core businesses, improved our underwriting disciplines and put decision-making closer to our customers. In our largest business, Australia Direct, we grew GWP by more than 9% and insurance profit increased by 18%,” Mr Wilkins said. “We also delivered the $130 million per annum run-rate of pre-tax cost savings targeted in our Australian operations.
“These actions have seen us deliver a result ahead of last year and broadly in line with the guidance given in February. However, there is still more work to do. While our performance has improved, it’s below theexpectations we held at the outset of the year largely due to unprecedented volatility in investment markets, high natural peril claim costs, a slower than anticipated recovery in CGU and a disappointing first half performance in our New Zealand business.
“We’re confident the fundamentals of our business are now stronger and we expect to continue to improve our performance this financial year,” Mr Wilkins said.
Key factors contributing to the full year result include :
- A strong performance from Australia Direct
- Improved cost control with the $130 million per annum pre-tax run-rate of cost savings in Australia achieved
- A return to profitability by New Zealand in the second half of the year
- A solid performance from specialist motor underwriter, Equity Red Star, in the UK and the sale of the underperforming mass-market portion of the UK business
- An adverse $50m effect from lower running yields
- Natural peril claim costs of $451 million, net of reinsurance, compared to $502 million last year
- A $191m reduction in reserve releases.
Mr Wilkins said as a result of volatile markets the Group’s shareholders’ funds returned a loss of $39 million (FY08: $24m), and credit spreads adversely affected the insurance profit by $13 million (FY08: -$122m).