Number one insurer Insurance Australia Group (IAG) has recovered from the doldrums with a solid half-year net profit of $62 million to December 31, compared to $42 million in the first half of last year. It’s a solid result for CEO Michael Hawker and Chairman James Strong, who have set the company on a dramatic growth path and kept the formerly fractious board under control.

IAG shares increased by 5% after the group announced it’s on track to meet its full-year targets.

The results have silenced critics of IAG’s $1.8 billion acquisition of CGU and NZI last year (they would have provided $48 million in a normal year). The group’s underwriting profit increased from $37 million to $71 million and the insurance profit rose from $125 million to $290 million compared to the corresponding period.

The combined operating ratio for the group was 96%, while the expense ratio fell from 20.1% to 19.2%.

Mr Hawker said the results are “particularly pleasing”, but the company will still suffer an after-tax exposure of around $42 million to the Canberra bushfires.  

“During the six-month period we experienced no major insured catastrophes and had no material one-off items, so it’s easier to track the strong performance of our underlying business,” he said.

“While the continued decline in equity markets is having an ongoing impact on our bottom-line performance, the actions we’ve taken to reduce our exposure to these markets saw us increase reported profits.

“A significant factor in the $131 million increase in investment income on technical reserves for the first half to $219 million was eliminating our exposure to equity markets in that portfolio.”