IAG has reported a 1H16 insurance profit of $610 million (1H15:$693 million) and an insurance margin of 14.9% (1H15:13.4%), representing a sound result despite challenging conditions in its core Australian and New Zealand commercial markets.

Key financial indicators are:

  • Insurance profit $610 million (1H15:$693 million)
  • Reported insurance margin 14.9% (1H15:13.4%)
  • Underlying insurance margin1 14.2% (1H15:13.3%) including a Berkshire Hathaway quota share positive effect of approximately 250 basis points (bps)
  • Gross written premium (GWP) $5.5 billion (1H15:$5.6 billion)
  • Net profit after tax $466 million (1H15:$579 million)
  • Cash return on equity (ROE) 14.7% slightly below IAG’s 15% through-the-cycle target
  • Interim fully franked dividend 13 cps (1H15:13 cps) or 62.7% of cash earnings
  • Full year dividend policy range raised to 60-80% and a special dividend of 10 cps reflecting strong capital position

IAG in Australia and New Zealand

IAG’s consumer businesses in Australia and New Zealand, representing more than 60% of the Group’s GWP, are performing well. This is reflected in strong profitability and modest GWP growth in a low claims inflation environment.

The Australian Business Division saw a 6.3% contraction in GWP, with a continuation of
tough commercial market conditions pushing average rates lower, and strict adherence to
underwriting disciplines contributing to lower volumes. The business maintained a double digit
underlying margin of 10.7% (1H15:10.7%), assisted by the quota share effect, with synergies
from the Wesfarmers integration partially offsetting pressures from the market environment. The
reported margin of 8.4% (1H15:6.6%) was lower than the underlying margin following an
adverse perils experience versus allowance.

IAG Managing Director and Chief Executive Officer Peter Harmer, who announced a new organisation structure in December last year, said the Group was focused on driving future growth and profitability by sharpening its focus on customers’ needs.

“Our goal is to create a company that is customer-led and data-driven, simpler and more scalable, agile and quick to respond to the changes we are seeing in the community and in business – and with the changes we have made I am confident we are well on track to achieving this goal,” he said.

Who is IAG

Its businesses underwrite over $11.4 billion of premium per annum, selling insurance under many leading brands, including: NRMA Insurance, CGU, SGIO, SGIC, Swann Insurance and WFI (Australia)

 

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