For anyone accusing the insurance industry of profiteering, IAG CEO Michael Hawker has given them cause to reconsider. He has warned investors that Australia’s largest general insurer could post a full-year net loss as high as $40 million due to weak investment markets.

IAG forecasts a loss of between $15 million and $40 million, blaming it on the “worst performance from investment markets in 14 years”. Mr Hawker said the company has taken steps to reduce its exposure to volatility in the equity market.

Speaking on Channel Nine’s Business Sunday, Mr Hawker said the insurer will report a loss because of the underwriting loss from the September 11 WTC attack, a fall in the Australian and international equity markets and the NSW bushfires last summer.

Mr Hawker said in March that IAG will remove its exposure to equities in its technical reserves, from which it pays its claims.

“We remain committed to retaining our shareholders’ funds in equities as they deliver the highest returns over the longer term,” he said.

The company also planned a strategy in June for its technical reserves through the combination of an outright sale of equities and derivatives transactions.

Mr Hawker said these initiatives are “good news” for shareholders as they offer the insurer a level of protection if the equities downturn continues.

Standard & Poor’s has warned that the magnitude of the loss will force a reassessment of IAG’s AA+ rating after the company officially releases its full-year result on August 20.