Michael Hawker, CEO of No 1 general insurer Insurance Australia Group, has taken advantage of the most profitable market in years and the purchase of a top 10 competitor to record a net profit of $153 million for 2002/03. And he’s learning rapidly that success leads to high expectations of even better to come, especially in an investment market starved of winners.

The group says the announcement “confirms the sound logic of the CGU and NZI acquisition” and “reflects the ongoing success of initiatives to improve business fundamentals”. It was a big jump from the $25 million loss recorded last year as Mr Hawker cleared the decks for action, but now analysts say next year IAG should make a profit up to three times higher than this one.

Mr Hawker says the acquisition of CGU and NZI, along with a combination of other market factors, has boosted the group’s overall results.

Gross written premium increased 45% from $3.6 billion to $5.2 billion. Around 9% of this was organic, with over half coming from strong growth in policies in force. And 36% came from the CGU acquisition.

“These results demonstrate how our strategy of diversifying by product, geography and distribution channel is generating consistent and sustainable returns for shareholders,” Mr Hawker said.

He told Channel Nine’s Business Sunday that while IAG is “still digesting the Aviva purchase… the latest good results look like being repeated in the coming year”.

The Group’s combined operating ratio was 95.7%, consistent with 95.5% in the previous year and its insurance margin rose to 12.3%, up from 8.7% in the previous corresponding period – exceeding its current target range of 9-11%.

Mr Hawker says “bedding down” the CGU and NZI acquisitions will take at least another 18 months, but it’s not looking much further than that into the future at this stage. He said IAG isn’t interested in purchasing AMP’s local operation; in fact, he hasn’t even thought about it.

Analysts say they expect next year’s profit to be in the area of $440-470 million next year, and some are tipping the next year will see profit go as high as $565-630 million.