Insured Group’s auditor has raised concerns about the future of the business due to rising losses.

In a report included in Insured Group’s 2011 annual report for the year ending June 30, Grant Thornton noted the company incurred a net loss of $4 million and a net cash outflow from operations of $6 million during the year.

“The consolidated entity’s current liabilities exceeded its current assets by $8.9 million and total liabilities exceed its total assets by $839,000,” the auditor said.

“These conditions, along with other matters, indicate the existence of material uncertainty which may cast significant doubt about the consolidated entity’s ability to continue as a going concern.

“Therefore the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business.”

Insured Group MD Wayne Miller declined to answer insuranceNEWS.com.au questions about the auditor’s report and how the company plans to deal with its current financial difficulties.

Grant Thornton says the ability for Insured Group to continue as a going concern will depend on it undertaking a capital-raising of a minimum of $2 million in the first quarter of 2012.

It also says Insured Group would have to achieve a successful listing on the Australian Securities Exchange and a return to an operating net profit and positive cashflows through active management of the current levels of discretionary spending in line with the funds available to the company.

The auditor says there has to be revenue growth from the Priority One joint venture and Insured Group will need the continued support of its bankers.

The annual report says Insured Group’s directors “have reviewed the business outlook and cash flow forecasts and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the company will achieve the matters set out [the above conditions] in the report”.

“The directors believe they will be successful in enabling the company to seek out and evaluate investment opportunities and provide working capital,” the report says.

“Should the company be unable to continue as a going concern, it may be required to realise its assets and extinguish liabilities other than in the normal course of business and at different amounts stated in the financial statements.”

Revenue for Insured Group fell from $6 million in 2009/10 to $3.9 million for the 12 months ending June 30 this year.

The net loss after tax was $3 million in 2009/10, but this was reduced to $2.5 million in 2010/11.