IAG’s net profit after tax soared to $642m in the first half of 2014, compared to $461m in 1H13, which included a loss of $182m in respect of the discontinued UK business.
The first half insurance profit of $758m (1H13: $815m), which equates to a reported insurance margin of 17.5% (1H13: 19.9%).
This was assisted by higher than originally expected prior period reserve releases equivalent to 4.3% of net earned premium (NEP), and was achieved on the back of a 4.2% increase in gross written premium (GWP) to $4,786m.
Managing director and CEO Mike Wilkins said: “This is a strong result that comprises improved operating performances from each of the businesses in Australia and New Zealand, as well as an increased profit contribution from the Group’s interests in Asia.
“We are pleased with the continued improvement in the group’s performance, which reflects the benefits of our pursuit of a strategy that focuses on clear priorities. Our underlying margin has more than doubled since the 2009 financial year, as we have improved our underwriting and claims disciplines and realised significant cost efficiencies,” Wilkins said.
GWP growth in the half was lower than that of immediately preceding periods, reflecting a combination of factors including reduced need to recover higher input costs via rate increases in property classes. Reported GWP has also been influenced positively by the translation effect from a stronger New Zealand dollar, and negatively by the cessation of the Fire Services Levy (FSL) in Victoria from 1 July, 2013. On an ex-Victorian FSL basis, GWP growth was 6.0%.
Shareholders’ funds income of $233m (1H13: $201m) reflected strong equity market returns in the period.
The board has determined to pay a fully franked interim dividend of 13 cents per share (cps), an increase of 18.2% (1H13: 11 cps). The interim dividend will be paid on 2 April, 2014, to shareholders registered on 5 March, 2014.
Australia Direct’s GWP grew by 0.7%, to $2,279m, or 2.3% after the exclusion of Victorian FSL effects. This was derived from a mixture of rate increases, notably in home and New South Wales CTP, and volume gains, particularly in motor.
CGU sustained the double-digit margin it reached in FY13, as benefits continue to be realised as planned from past portfolio remediation activity and the implementation of
CGU’s new operating model. GWP growth was 1.8%, or 4.8% on ex-Victorian FSL basis. Reported GWP of $1,459m comprised growth from most areas of the business and was sourced from a mixture of rate and volume.
The New Zealand business GWP growth was a solid 4.7% in local currency terms, with rate increases in the domestic home owners’ portfolio a feature across all distribution channels. Reported GWP growth, of 17.7%, includes a favourable foreign exchange translation effect.
The group has reiterated the updated guidance for FY14 provided on 23 January 2014, of GWP growth of between 3-5% and a reported insurance margin in the range of 14.5-16.5%.
