IAG expects drop in profit

SYDNEY - Insurance Australia Group says it expects to report a drop in annual profit in the 2010 financial year and has made changes to its executive team, as it says it also expects an improved performance in fiscal 2011.

Annual profit to June 30 will be A$91 million ($112 million), down from A$181 million in fiscal 2009, IAG said yesterday. Insurance margins for the year to June 30 would be 7 per cent.

IAG said it expects to announce an insurance profit of A$493 million for the year, down from A$515 million in the 2009 financial year.

This would be achieved on net earned premium of A$7.1 billion, down from A$7.2 billion in 2009, it said.

IAG would pay a final dividend of 4.5c, fully franked.

IAG chief executive Mike Wilkins said the result showed a further uplift in the underlying performance of the group's Australian and New Zealand businesses during the year.

"While this year's financial result does not reflect the expectations we held at the outset of the year, I'm encouraged by the clear and ongoing improvement in the operational performance of our businesses in our home markets of Australia and New Zealand," he said.

"The second half of the 2010 result has borne in excess of A$200 million of net pre-tax claim costs in respect of the unprecedented Melbourne and Perth storms in March 2010, as well as the A$367 million charge required in our UK business following the deterioration in bodily injury claim experience," the company said.

"I'm confident our performance will improve significantly in FY11.

"This is evidenced by our guidance which remains unchanged, and comprises an insurance margin of 10.5 per cent to 12.5 per cent."

Guidance for fiscal 2011 assumed losses from natural perils are in line with budgeted allowances of US$435 million ($595 million), no material movement in foreign exchange rates or investment markets, and lower net reserve releases (excluding Britain) than fiscal 2010, IAG said.

- AAP