IAG has reported a $493 million profit for the 2010 financial year despite a blowout in natural disaster claims in Australia and problems in its UK operations.

The March storms in Melbourne and Perth this year led to natural disaster claims exceeding forecasts by $113 million to $463 million. The Melbourne storm alone led to about 75,000 claims at a net cost to IAG of $210 million.

CEO Mike Wilkins told a briefing last week that despite the increase in claims, the Australian and NZ businesses delivered a strong performance in the 12 months ending June 30.

“There have been clear ongoing improvements,” he said.

Australian direct business delivered a $569 million profit, which resulted in an insurance margin of 16.9%.

Last year the direct business reported a $373 million profit and an insurance margin of 12%.

The Australian intermediated business (primarily CGU) turned in a $139 million profit compared to $48 million last year.   

IAG NZ reported a profit of $131 million and a margin of 14.7% while the UK operation delivered a loss of $355 million and a negative margin of 65.5%.

Mr Wilkins says IAG has had to take a $367 million writedown in the UK following an increase in bodily injury motor claims.

“The UK results are disappointing due to the one-off charge, but we are well under way with remedial actions,” he said.

“The market remains challenging, but we are implementing rate increases of up to 20% across most classes of business, exiting unprofitable broker relationships and strengthening underwriting and actuarial resources.”

Despite problems with some areas of the business, gross written premium for the group was up 3.8% to $7.8 billion.

Mr Wilkins remains bullish about this financial year’s premium inflows which are tipped to grow by 3%-5% with the insurance margin target of 10.5%-12.5%.

The predictions assume natural disasters won’t exceed the $435 million budget allocated for this year.

“We are continuing to pursue growth opportunities in our chosen markets, particularly Asia. However, we are still expecting a small first-half loss in the UK.”