IAG has reported net profit of $923 million for the year to June 30, down 0.6% on the previous year.

However, gross written premium was up 1.8% to $11.65 billion thanks to rate increases, and insurance profit gained 10.8% to $1.41 billion.

The insurer recorded a combined operating ratio of 84.7%, improving from 87.3%.

“This is a solid result for IAG, with an encouraging improved underlying performance, in line with our expectations,” MD and CEO Peter Harmer said.

“We’ve met the guidance we provided last year, slightly exceeding the reported margin component thanks to favourable natural perils and higher reserve releases than anticipated.

“Australian Consumer [division] had a strong performance as rate increases addressed claims inflation challenges; there was a modest improvement from Australian Business and a continued strong performance from New Zealand.”

IAG says Australian personal lines recorded rate-driven growth of 4-5%, while commercial lines maintained rate momentum of about 5%.

During the year a simplified structure was embedded, including the single combined Australia Division under Mark Milliner.

“Our optimisation program is progressing to plan and we expect to see a benefit of about $100 million pre-tax [this financial year],” Mr Harmer said.

“We also announced the sale of our operations in Thailand, Indonesia and Vietnam, which are expected to complete [this year] and deliver a net profit after tax in excess of $200 million.”

Mr Harmer says in the second half IAG has “worn about $10 million additional expenses” from costs associated with the Hayne royal commission.

He says earlier this month the commission requested “fairly broad” information, and IAG has already responded.

“Our understanding is that other industry participants received very similar requests,” he said.

See ANALYSIS.