IAG’s Australia Direct business expects to report relatively flat gross written premium (GWP) and an improved underlying margin this fiscal year.

“Across all our business lines underlying profitability has improved against FY13,” Australia Direct CEO Andy Cornish told an investor briefing.

The removal of Victoria’s fire services levy, a decision to exit the Queensland compulsory third party (CTP) market and increased competition in the ACT will affect the headline GWP figure, he says.

Australia Direct accounted for 48% of the group’s GWP and 54% of IAG’s insurance profit in the six months to December 31.

It expects “modest premium growth going forward”, which is likely to be in the low single digits, Mr Cornish says. “We are in an environment where the need for rate increases has largely disappeared for the time being.”

He says the company is maintaining market share and posting modest volume growth in motor, will achieve higher underlying GWP in home despite a small volume loss, and has reversed a drop in NSW CTP market share that followed rating structure changes.

“In all instances we are maintaining our pricing discipline,” he told the briefing.

IAG has reaffirmed its overall group guidance for an insurance margin of 14.5-16.5% and gross written premium growth of 3-5%.