Insurance Australia Group (IAG) has further cemented its position as Australia’s leading insurance company, announcing a stronger than expected profit for the last half of 2003 as well as a share buyback scheme. IAG recorded a net profit after tax of $302 million for the six months to 31 December 2003.

The result reflects the increased scale of business following the acquisition of CGU and NZI in January last year, and the considerable improvement in equity markets through 2003.

CEO Michael Hawker says the inclusion of CGU and NZI has diversified the group’s mix of business and added approximately $2.5 billion in annual revenue, making it easier to produce stable, sustainable returns.

“We now have a wider range of products and a greater presence in all our markets... This diversification improves our ability to produce stable returns despite fluctuations in individual portfolios or regions,” he said.

Mr Hawker also nominated the considerable improvement in equity markets as contributing to the good results. Return on shareholders’ funds increased by $333 million, from a pre-tax loss of $129 million in the previous corresponding period, to a pre-tax profit of $204 million. “This is our highest half-year return since listing,” he said.

Other elements of the half-year results compared with the previous corresponding period, and bearing in mind the impact of the CGU and NZI acquisition on trend comparisons, include:

• The group combined operating ratio is 90.5%, down from 96%;
• Net earned premium increased to $2.9 billion from $1.8 billion;
• Underwriting profit increased to $277 million from $71 million;
• Cashflow increased to $694 million from $293 million.

Damage from the 1-in-100 year storm in Melbourne last December generated up to 12,000 claims. Other storms in Queensland and New Zealand are yet to be calculated and will be recorded in the group’s full-year numbers.

Soon after reporting results, the group announced it would spend $350 million towards an off-market share buyback. Further details have not yet been released.