IAG and RACV Insurance joint venture Insurance Manufacturers of Australia (IMA) has reported strong profitability last financial year.

A report from Bank of America Merrill Lynch says IMA’s insurance margin grew to 17% from 11% the previous year, even as top-line growth slowed to 7.6% from 11.5%.

Home and contents has increased its share of IMA premiums to 40% from 32% in five years, with an implicit compound annual growth rate of 13%, compared with 4% growth in motor.

IAG holds 70% of the venture, which includes all its short-tail retail business in Victoria, the ACT and NSW.

IMA contributes about 65% of gross written premium (GWP) in IAG’s Australia Direct business and about 31% of group GWP, the report says.

IAG’s direct business outside IMA generated a 24% margin last financial year, indicating strong returns that may be above statutory targets in the NSW compulsory third party (CTP) business, according to the report.

Future risks to profitability include planned CTP changes by the NSW Motor Accidents Authority and rising competition from challengers.