IAG’s growth falls flat in 2016 FY partially offset by positive exchange rates in Asia

Insurance Australia Group (IAG) experienced relatively flat growth in the fiscal year 2016, partially offset by favourable foreign exchange rates for its Asian operations.

IAG reported gross written premiums of A$11.37 billion ($8.7 billion) for the fiscal year 2016 ending in June, a 0.6 percent decrease from A$11.4 billion for the 2015 fiscal year.

GWP developments were affected by a sound rate and volume growth in its short-tail personal lines in Australia and New Zealand, offset by softer commercial market conditions in both countries, according to IAG.

In particular, its Australian business division saw a GWP decrease of 6.7 percent year-over-year amid what IAG calls “tough commercial market conditions.”

The GWP for its New Zealand operations experienced a decline of 3.7 percent over the period.

However, IAG's Asia operations experienced consolidated GWP growth of 9 percent, which the company attributes to sound gains in Thailand amplified by a favourable foreign exchange rate effect.

IAG's net profit before tax was A$1.1 billion, an 11.1 percent decrease from A$977 million for full year 2015.

Its net profit after tax of A$625 million was 14.1 percent lower than the A$728 million for the fiscal year 2015.

IAG attributes the drop in net profit to a significantly lower contribution from investment income on shareholders' funds, reflecting relatively flat equity markets in the period, a higher effective tax rate due to a lower favourable effect from earthquake-related reinsurance recoveries, and a A$139 million post-tax charge relating to capitalised software assets.

Peter Harmer, managing director and chief executive officer, said: “We’ve seen solid growth and strong profitability in our personal insurance lines in Australia and New Zealand, primarily driven by GWP growth for home and motor.

“Our commercial businesses in Australia and New Zealand have withstood continuing price pressure and maintained their strict underwriting discipline which has resulted in lower business volumes as we exited unprofitable business – but we are encouraged by growing signs of rate improvement.

“Asia represents an important source of long term growth for IAG. IAG’s proportional GWP (excluding China) has grown 7.5 percent to A$757 million, with India in particular performing well."