IAG forecasts improved profit margin

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8 February 2010

IAG has signalled an improved first-half performance with forecast insurance profit of $488 million, more than double the amount it earned in the same period last year.

The insurer expects a full year insurance margin of between 11.5-13%, up from a previous forecast of 9-11%.

Last year IAG last year reported insurance profit of $227 million in the first half, contributing to a slim overall net profit of $4 million.

The insurer attributes the improved result to continued underlying performance, lower claim costs and favourable credit spreads.

“Our largest business, Australia Direct, recorded solid gross written premium growth (GWP) and a strong insurance margin while our intermediated business, CGU, also recorded a further, steady improvement in underlying profitability,” IAG CEO Michael Wilkins said last week.

He also reported a “sharp turnaround” in the NZ business.

Lower natural peril claim costs of $121 million compare to $176 million for the same period last year, while a $28 million gain on credit spreads is a big improvement on a previous loss of $86 million. However, total reported GWP is expected to fall 1.5%.

IAG will announce its detailed results on February 25.