IAG has reported profit of $466 million for the six months to December 31, down 19.5% on the corresponding period in 2014.

CEO and MD Peter Harmer says the insurer caught a cold from the soft commercial market, featuring “the most competitive conditions in almost four decades”, plus a rapid deterioration of the NSW compulsory third party (CTP) scheme.

But he says the result is commendable given the market context, and he sees “green shoots” of recovery in commercial lines.

The period was the first to include the impact of the 20% quota share arrangement with Berkshire Hathaway.

The arrangement has met expectations, the company says, “lowering earnings volatility and reducing regulatory capital requirements”.

The group also announced a reinsurance package with Berkshire Hathaway that mitigates its exposure to earthquake and asbestos-related liabilities.

Group gross written premium (GWP) was down 1.1% to $5.54 billion, with commercial dropping 6.3%.

The consumer division recorded GWP growth in motor (2.3%) and home (2.7%), but a 2.3% drop in CTP, leading to overall growth of 1.6%.

The combined operating ratio improved to 89.3% from 94.8%, with net natural peril costs hitting $278 million, $22 million below allowance.

GWP in Asia grew more than 20% to $197 million. Of that, 50% was written in Thailand, 33% in Malaysia, 14% in India, 2% in Vietnam and 1% in Indonesia.

Mr Harmer told insuranceNEWS.com.au he “couldn’t be happier” with the result.

“We believe we have hit the bottom of the cycle and, with that in mind, it is really quite commendable and a credit to the team.

“With NSW CTP the past 12-18 months has seen a rapid increase in the frequency of low-value claims, and more and more are looking for legal representation.

“We don’t want to keep pulling the pricing lever and scheme reform is critically important.

“NSW CTP will continue to be tough, but commercial has seen some green shoots and is bottoming out.

“We have put some price increases though and our retention rates have held firm.

“The days of major rate decreases are behind us. I’m not expecting any tailwind, but if we can at least reduce the headwind that’s a good start.”