IAG’s first-half net profit fell to $505 million from $778 million after severe weather affected its RACQ acquisition, while the new business helped lift gross written premium.

Reported GWP grew 6% to $8.9 billion, including a four-month contribution from RACQ Insurance.

IAG’s underlying insurance profit for the December half rose to $804 million from $747 million a year earlier, supported by its retail businesses and with Australian intermediated also delivering a stronger result amid softer commercial lines conditions.

CEO Nick Hawkins says the Australian intermediated division delivered a “solid” GWP increase, aided by the WFI Insurance rural portfolio and a focus more on the SME sector than the corporate end of the market.

“There is clearly a soft market in some commercial lines, so it’s pleasing to be able to report underlying growth in this business here in Australia of 3.5%,” Mr Hawkins told a briefing this morning.

Intermediated Insurance Australia’s underlying insurance profit rose to $160 million from $152 million, and the reported insurance margin of 17.5% included $86 million of prior reserve releases.

Market conditions and currency headwinds presented challenges for the New Zealand commercial business, which IAG says maintained underwriting discipline.

Local currency GWP at NZI, the broker intermediated channel, decreased 10.4% to $NZ808 million ($688 million).

Mr Hawkins says IAG is continuing its technology transformation.

“We’ve accelerated delivery of the commercial enterprise platform in our intermediated business, improving how we underwrite and distribute insurance, and we have now migrated over 6 million policies onto our retail enterprise platform,” he said.

The group’s headline result included a $174 million one-off impact from severe weather that affected RACQ Insurance after its acquisition and before the business was integrated into IAG’s reinsurance program in January.  

The previous corresponding period benefited from $250 million in favourable perils experience and a $200 million business interruption provision release.

IAG forecasts “high single digits” GWP growth for the full-year, down from a previous expectation of about 10%, with a stronger second half expected.