IAG expects moderate premium rate growth this financial year, as a competitive market and subdued cost pressures curb increases.

“We are not seeing significant input cost pressures in any of our businesses and it is an increasingly competitive environment, particularly in the commercial insurance space in Australia and New Zealand,” MD and CEO Mike Wilkins told a briefing.

IAG’s gross written premium (GWP) grew 3.9% to $9.78 billion in the financial year ended June 30. The company forecasts a 17-20% gain this fiscal year, driven mainly by the Wesfarmers underwriting acquisition.

Insurance profit grew 10.6% to $1.58 billion last financial year, as a favourable catastrophe environment and improved investment returns offset competitive pressures.

Overall net profit after tax gained 59% to $1.23 billion, after 2012/13 earnings were hit by a loss on the discontinued UK business.

Investment income on technical reserves grew to $439 million from $270 million, while IAG’s net natural peril claim expense of $553 million was well below the allowance of $640 million, as benign Australian weather was partially offset by New Zealand storms.

The combined operating ratio was little changed at 86.9%, compared with 86.1% the previous year.

The company’s largest business division, Australia Direct, reported relatively flat GWP of $4.55 billion last financial year, while intermediary-focused CGU’s premium increased 1% to $3.06 billion.

New Zealand GWP grew 17.2% to $1.85 billion, lifted by an exchange rate benefit, while in local currency terms premiums grew 3.7%.

Asia represented 7.1% of group GWP, compared with 6.3% in 2012/13, while the division’s profit dropped to $14 million from $20 million.

Mr Wilkins says expansion in Indonesia remains a key focus, and the company is continuing to seek a suitable partner. “We are looking to partner with an organisation that has an established brand, established customer base and good distribution footprint across the nation, so we are talking to a number of people,” he said.

“The important thing is to be patient, because you do have to have that alignment of interests.”