Market not impressed by IAG

INSURANCE Australia Group shares have tumbled after the heavyweight insurer underwhelmed investors with its full-year results and trading outlook.

Australia’s biggest insurer, which owns brands including CGU, revealed yesterday that it had suffered a 0.6 drop in net profit for the year to June, to $923 million. It came despite a rise of almost 11 per cent in its insurance operations, with higher margins offset by a fall in investment income and a higher tax bill. Revenue rose 2.6 per cent to $16.41 billion.

The company’s Australian consumer division had a strong year, managing director Peter Harmer said, due to IAG lifting rates to compensate for an increase in claims.

“There was a modest improvement from Australia business and a continued strong performance from New Zealand,” he said.

Gross written premiums in India increased from $555 million to $773 million, while profit in Malaysia increased from $28 million to $40 million.

The insurer expects gross written premium to grow 2 per cent to 4 per cent this financial year.

Investors marked IAG down after the results were released, with its share closing 48c, or 5.8 per cent, lower at $7.76 — the lowest since April.

Mr Harmer confirmed that IAG had been asked for information for the sixth round of hearings in the financial services Royal Commission.

Those hearings, due to start on September 10, will focus on the insurance industry.