IAG CEO Michael Hawker has stood firm on rates and received the backing of his chairman at last week's AGM.

Chairman James Strong told the media after the meeting the company's disappointing results should not "mean you abruptly somersault and change the chief executive".

IAG's net profit for the 2007 financial year was down 27% to $552 million from $759 million, and last month the insurer was forced to issue an earnings downgrade, reducing its gross written premium growth forecast to 7-9% from 10-12%.

Mr Hawker blames the company's "disappointing" performance on a number of factors, including "two negative cycles" in UK private motor and Australian commercial lines, and weather-related catastrophes including UK flooding and Australian storms.

He reiterated IAG's plan to address challenging Australian commercial market conditions by upping rates, despite the likely loss of market share.

Mr Hawker says commercial subsidiary CGU's 18% insurance margin masks "very challenging market conditions", with much of the profit coming from reserves.

"A number of individual insurance products are now trading at a loss," Mr Hawker said. He says this is "unsustainable" and IAG is therefore "repricing some of our business to adequately cover the costs, taking many of the cross-subsidies out of the current portfolios".

"Although this may reduce our market share in the short-term, we believe it is the most appropriate and responsible management position to take so that we generate an adequate return on capital."

IAG is also lifting its rates to counter the soft cycle in the UK motor market, which Mr Hawker says lost 11c for every $1 of premium written last year.

He also outlined to shareholders the reasons for IAG failing to break into the two most lucrative Asian growth markets.

In China, a change of executive personnel and plans for a sharemarket listing had scuppered the group's proposed investment in China Pacific Property Insurance. He told shareholders IAG was one of two shortlisted bidders for a local Indian insurer, "but the final price was substantially higher than we offered".

IAG had been named as the likeliest suitor for the Housing Development Finance Corporation but earlier this month, Munich Re secured a 26% stake in the Indian insurer.

At the AGM, shareholders registered a significant protest vote against resolutions to increase executive pay, with 12.6% voting against the general remuneration report and 9% against the proposal to increase non-executive director fees by $750,000 to $2.75 million.