IAG has reported an improved first-half net profit of $329 million due to benign weather, a series of cost-cutting measures and the improved pricing of risk.

The result is a big improvement on last year’s negligible $4 million first-half profit while insurance margins also climbed to 13.4% from 6.2%.

Under CEO Mike Wilkins the insurer has restructured business units, shed staff and affirmed an intention to write profitable business at the expense of topline growth.

IAG’s insurance profit of $488 million compares to $227 million at the same point last year, with the Australia Direct business contributing 7.8% improvement in gross written premium and an insurance margin of 16.9%.

The direct business – which includes NRMA Insurance, SGIO and SGIC – reported profit of $281 million, up from $194 million previously.

NZ operations also bounced back from a $17 million loss to record profit of $68 million buoyed by an insurance margin of 15%.

Mr Wilkins welcomed an improved result from intermediated business CGU, which recorded a $112 million profit against a previous $7 million loss. Average written premium in the business increased about 6%.

“It reflects the cost-saving initiatives we’ve implemented across the group, together with stronger underwriting and claims management disciplines in that business,” he told insuranceNEWS.com.au.

Elsewhere, increasing bodily injury claims contributed to a fall in UK profit to $24 million from $77 million, while profit in Asia fell from $9 million to $2 million.

Favourable credit spreads contributed a further $28 million to the bottom line, while natural peril claims costs of $121 million were well within a budgeted $166 million.

Reported gross written premium (GWP) fell 1.5% to $3.86 billion due to the impact of divested businesses and foreign exchange movements.

For the full year, IAG has forecast flat GWP and reaffirmed an earlier forecast insurance margin of between 11.5-13%.