Promina has rewarded the faith of investors who bought shares in it’s $1.9 billion interim public offering earlier this year with a higher-than-expected half-year net profit of $135 million. And Promina is confident it is well on the way to achieving a full-year profit of about $188 million.

Promina’s anticipated profits are in line with initial prospectus forecasts. The group, which was listed on the Australian Stock Exchange in May, had a net net earned premium of $1.187 billion, with underwriting profits almost hitting $40 million.

Promina MD Mike Wilkins says the group also expects to achieve a return on capital of between 12.5-15% for the year. He attributes the latest results to “a solid underwriting performance, significant growth from Promina’s specialty businesses, increased investment income and a favourable claims environment”.

Standard & Poor's Credit Analyst Paul Clarkson said Promina benefitted from a good operating environment in the local market, along with a positive contribution from the life and funds management operations.

Mr Wilkins says the half-year figure also reflects the group’s “rigorous focus on core competencies” such as claims management, underwriting disciplines and actuarial practices. 

A claims ratio of 67% (63.7% excluding Canberra bushfires) and an insurance margin of 9.1% were recorded – both ahead of the full year forecast of 71.1% and 5.7% respectively. It recorded an overall combined ratio of 96.7% (93.4% excluding Canberra bushfires).

The $135 million result included a $27 million after-tax hit from the impact of the Canberra bushfires. “That did have a dampening effect on what otherwise would have been a good half,” Mr Wilkins said. “However, we think the benign weather conditions since Canberra have offset that.”

The overall return on capital was 13%, which Promina says “is within the group’s long-term target range of 12.5-15%”.

Promina is reviewing its long-term capital strategy and Mr Wilkins predicted a slowing in the rate of premium increases in 2004 and beyond. “At the moment our outlook is that prices will only move in line with inflation and any observed claims inflation that we see.”