IAG has adjusted upwards its gross written premium (GWP) guidance for this financial year as MD and CEO Nick Hawkins says the business is on the right track, following its first-half earnings results.

The insurer projects GWP will post a “mid-single digit growth” from its previous forecast for a “low” single number increment and at the same time reaffirmed its reported insurance margin guidance of 10-12%.

“We’ve reset the business with a simpler operating model, new leadership, and a clear strategy for growth which we are investing in to create long-term value for our stakeholders,” Mr Hawkins said.

“IAG delivered a solid performance in [the first-half], reflecting the foundations we have put in place to create a stronger and more resilient IAG.”

Insurance profit for the six months to December slumped 57.5% to $282 million from a year earlier, implying a reported insurance margin of 7.1% compared with 17.9% 12 months ago.

The decline is attributed to a number of factors such as the impact of significant natural perils costs of $681 million largely from severe weather events in October along with modest reserve strengthening of prior year reserves of $37 million.

Cash earnings dropped 61.9% to $176 million but the business made a statutory net profit of $173 million, a turnaround from the $460 million loss it reported a year earlier.

But Mr Hawkins says the three key divisions - Direct Insurance Australia, Intermediated Insurance Australia (IIA) and New Zealand – are showing positive trends.

He says he is also encouraged by the “strong” 6.2% rise in overall GWP to $6.57 billion in the December half.

Direct Insurance Australia division – one of three Mr Hawkins created as part of his plans to simplify the business – made an underlying insurance profit of $391 million in the December half compared with $398 million a year earlier.

IIA reported a $4 million loss from $84 million profit and New Zealand suffered a small drop in profit to $146 million from $148 million.

He says IIA under Group Executive Jarrod Hill “continues to improve” and remains on track to achieve its stated goal of $250 million by the 2023/24 financial year.

“We are seeing a notable turnaround in our intermediated Australia business which grew GWP [by 9%], reported strong retention and some new business growth, and an improving underlying margin of 5%,” Mr Hawkins said.

Rating agency S&P says the IAG’s earnings are likely to improve during the second half of this financial year.

“Continued solid topline growth should be supplemented by benefits flowing from a range of strategic initiatives,” S&P said in a statement today.

“These initiatives include continued investments in digital capabilities, targeted marketing, and a heightened focus on underwriting discipline.

“Investment markets are also likely to weigh less on the insurer's earnings over the period.”