IAG has hailed a solid performance despite reporting net profit for the year to June 30 of $625 million, down 14.1% on the previous year.

CEO and MD Peter Harmer told insuranceNEWS.com.au the drop in profit is due to a halving of investment returns on shareholder funds and a significant difference in tax rates paid in the two years.

More telling, he says, is the insurance profit figure, which climbed 6.8% to $1.18 billion.

Gross written premium (GWP) fell 0.6% to $11.37 billion, but the combined operating ratio improved to 91.3% from 94.8%.

The company also announced a $300 million off-market share buyback, reflecting its strong capital position.

In the consumer division, short-tail home and motor lines performed well, generating GWP growth of 4%, but compulsory third party (CTP) profitability continued to suffer from claims frequency issues in NSW.

“We’ve got rate growth on the home portfolio, and in motor,” Mr Harmer said. “The only headwind is the performance of the NSW CTP scheme. We welcome the scheme reform, it is going well, but there is still a long way to go.”

The business division’s GWP contracted 6.7% amid “tough commercial market conditions”.

“We’ve withstood one of the softest markets I have seen in 38 years,” Mr Harmer said.

“We’ve got more aggressive with rate increases, with mid-single-digit rises through most of our property classes, but it’s very tough for new business.”

New Zealand suffered a 3.7% decline in GWP, with modest premium growth in personal lines more than offset by difficult market conditions in the commercial sector.

Asia GWP grew more than 9%, with solid gains in Thailand and the first full contribution from acquired business in Indonesia.

IAG expects GWP to remain flat during the current financial year.

Modest growth in short-tail personal lines in Australia and New Zealand is predicted, plus CTP volume growth from IAG’s entry into the SA market.

But this growth is expected to be offset by continued tough conditions in commercial markets and a $130 million reduction in GWP from the sale of Swann Insurance’s motor vehicle dealership business in August.

Mr Harmer says IAG continues to investigate emerging technologies through its IAG Garage division, which is part of IAG Labs.

He told insuranceNEWS.com.au three areas in particular are being examined: drones, connected homes and collision-avoidance technology.

“We are piloting the use of drones and this allows us to triage claims and make sure the customers with the most need get the most assistance. We are looking to move [drone use] to the pre-loss environment too.”

With connected homes, the focus is on sensors within devices and how they can “talk” to each other. A pilot is concentrating on security – allowing a homeowner to see the state of all locks on windows and doors.

“The example I use is that if your child got home before you, you could unlock the door to let them in and then lock it again behind them,” Mr Harmer said.

“We can’t be sure where this is going to go, but it is important to experiment with this technology, and understand how we can adapt it for our customers.”