IAG Chairman Elizabeth Bryan has apologised for organisational and risk management failures that led to the insurer reporting a financial-year loss of $427 million.

The headline result was hit by pre-tax provisions of $1.15 billion for pandemic-related business interruption claims, $238 million for customer refunds arising from past pricing issues, $40 million for a Swann Insurance class action settlement and $51 million relating to payroll compliance.

Ms Bryan says the business interruption issue resulted from a failure to update references to legislation, while on the pricing issues, the wording of promises to customer did not accurately reflect complex, model-based pricing algorithms.

“Let me take this opportunity to apologise to all our shareholders for these management and operational issues and the impact they have had on IAG’s returns,” she says in the annual report.

“Each of these failings was costly and unacceptable. However, we are now at the point where all of the issues identified are well understood and being properly managed and accounted for.”

The systematic way in which management has identified and remediated them, and rebuilt the control systems around them, should give confidence they will not occur again, she says.

Ms Bryan is not standing for re-election at this year’s annual general meeting, after six years as chairman, with board member Tom Pockett set to take over the role.

IAG’s overall insurance profit, excluding the one-off items was $1 billion compared with $741 million in the previous corresponding period while the reported insurance margin rose to 13.5% up from 10.1%.

Direct Insurance Australia made a reported profit of $718 million, New Zealand achieved earnings of $305 million, while Intermediated Australia reported a $10 million loss, in the first reporting split since IAG restructured its Australian business.

S&P Global Ratings says it would expect, with flagged increases in premium rates and margin improvement, that IAG net income will improve to a profit of more than $600 million this financial year.

“Overall, we see underlying competitive strength and ongoing business improvement contributing to a solid turnaround in earnings for 2022 and maintenance of very strong capital metrics,” it said.

See ANALYSIS.