IAG has lowered its full-year financial outlook for the second time in three weeks after last weekend’s torrential rainfall and flooding continued “an exceptionally harsh” natural perils season.

The full-year reported insurance margin forecast was cut to 12.5-14.5% from a revised January 24 forecast of 14.5-16.5%, while the company also raised its net natural perils assumption to $850 million, after boosting it last month to $715 million due to hailstorms and bushfires.

IAG provided the updated outlook with the release today of catastrophe-affected financial results for the six months ending December 31.

“While it is clear the bushfires have significantly impacted our first-half headline result, the important message I would like to emphasise is our underlying performance has been strong and it is in line with expectations,” MD Peter Harmer said.

First-half net profit fell 43% to $283 million, mainly due to the sale last year of the Thailand business and a customer remediation program, while the reported insurance margin slipped to 13.5% from 13.7% a year ago due to the bushfires.

Mr Harmer says the insurance industry will face some additional claims inflation pressures following this season’s catastrophes, while IAG may also see some reinsurance pricing impacts.

“It is still reasonably early in the context of how these losses are going to develop and our catastrophe insurance program doesn’t renew until the first of January,” he told insuranceNEWS.com.au today.

“There will be some impact on premiums but it is just a little early to be definitive at this stage.”

Mr Harmer says the current season has triggered broader debate and greater community concern than ever before over climate change and its impacts, and the disasters will put increasing pressure on governments at all levels to respond.

“We are seeing the green shoots of action and I do expect the events of the past few months will now accelerate that,” he said.

IAG’s gross written premium (GWP) during the first half rose 1.4% to $5.96 billion, with “like-for-like” growth underpinned by rate increases.

“In Australia, while we achieved sound growth in our short-tail personal lines, overall GWP growth was flat,” Mr Harmer said.

“This reflected business exits and continued remediation in our commercial business, and lower CTP premiums in the wake of scheme changes.”

Average Australia commercial rate increases of 5.5% were offset by lower volumes, while for personal lines the rate increases matching claims inflation were accompanied by relatively modest volume movement

New Zealand GWP grew 4.2% in local currency terms, underpinned by rates and volume gains.

IAG says it expects the cost of the latest heavy rain event in eastern Australia will be capped at $135 million as a result of its reinsurance program.

The company also says the sale of its interests in India is set to be completed in the current half, but the divestment of the smaller Vietnam business has fallen through after failing to receive the necessary regulatory approvals. The company is assessing alternative exit options and also continuing to look at options for its Malaysian interests.