IAG’s profit grew to $642 million in the six months to December 31, up 39% on the corresponding period in 2012, with MD Mike Wilkins saying rate increases are slowing.

Gross written premium (GWP) was $4.79 billion, up 4% on the December 2012 half but down 2% on the six months to June 30 last year. GWP increased 6% when excluding the Victorian fire services levy (FSL).

Net claims grew 3% to $2.51 billion and the underwriting profit increased 9% to $671 million.

Mr Wilkins says all divisions recorded a strong performance. The group realised operating efficiencies, reinsurance costs fell and claims inflation in motor and property remained absent.

CGU increased GWP by 2% to $1.46 billion – or by 5% excluding the FSL – but its underwriting profit fell 13% to $210 million.

Net claims grew 15% to $701 million and commission expense gained 19% to $234 million.

Mr Wilkins says GWP grew on a mix of rate and volume rises. He expects further growth and a strong underlying profit margin for CGU in the second half.

The commercial motor market is competitive and IAG has revised its pricing accordingly, he says.

Australia Direct GWP grew marginally to $2.28 billion amid an easing of pressure in the NSW compulsory third party (CTP) market, the decision to exit the Queensland CTP market and more competition in the ACT. 

The underwriting profit from direct business increased 5% to $330 million.

New Zealand GWP grew 18% to $884 million, driven by a weaker New Zealand dollar, while underwriting profit more than doubled to $124 million from $53 million.

Asian GWP gained 12% to $154 million.

IAG’s combined operating ratio was steady at 84.6%. The group recorded $335 million of disaster losses, the major ones being $67 million from hail and rainstorms last November and $65 million from the NSW bushfires in October.

The acquisition of Wesfarmers’ underwriting companies will provide “significant long-term earnings accretion”, Mr Wilkins told analysts.

He says he is confident New Zealand’s Commerce Commission will approve IAG’s takeover of Lumley New Zealand, because the business is complementary rather than a direct competitor to IAG in many lines.