Major insurer IAG has reported a record loss for the June financial year, while one-time suitor QBE has achieved an impressive result in a difficult market.

The IAG result – a slump of $813 million over last year’s profit – comes as new CEO Mike Wilkins draws a line in the sand and sets up a complete makeover of the group.

Just a few Sydney blocks away, QBE CEO Frank O’Halloran had a lot more to smile about last week, although the 7% drop in half-year profit to $859 million over the corresponding period last year demonstrates the difficulty insurers are facing now as the economy cools and investment returns weaken.

And Mr O’Halloran has made it clear the move to bring IAG into the fold is no longer on QBE’s agenda – a fact that may well make the IAG annual general meeting in November a fiery affair for Chairman James Strong.

Analysts suggest the market must now react with sharper rises in premiums to counter falling investment income. However, brokers say the level of competition in the Australian commercial insurance market in particular is still dampening the ability of companies like IAG subsidiary CGU to apply the sort of “correction” they would like.