Insurance Australia Group will not release the results of a review of its troubled British car insurer until the end of the year, amid speculation that it could be eyeing an exit from the market.
The decision came as IAG announced its full-year net profit fell 17.2 per cent to $207 million after the write-down of the remaining asset value and goodwill of its British business.
Troubles in Europe overshadowed a rebound in earnings for IAG's Australian and New Zealand businesses.
After stripping out the $297 million British write-down, IAG's cash profit for the year to end-June matched market expectations, coming in 17.5 per cent higher at $583 million.
The IAG chief executive, Mike Wilkins, said the results highlighted the strategic and operational focus that was being brought to bear.
“We've had a tough few years, mainly driven by external market factors, particularly perils and higher reinsurance costs, but we've started to come through the back end of that as reinsurance costs have now stabilised,” Mr Wilkins told BusinessDay.
The result was helped by rate increases and a relatively benign environment for major catastrophes over the past year.
Earnings from IAG's commercial insurance business, CGU, nearly doubled to $258 million.
But insurance earnings for the flagship Australian direct business, which sells insurance under the NRMA and RACV brands, fell 22.5 per cent to $544 million. This result was weighed down by higher reinsurance costs and an increase in natural disaster payouts following a hailstorm that hit Melbourne on Christmas Day.
The results round out the profit reports of the nation's biggest insurers. Yesterday Suncorp Group reported a 60 per cent lift in full-year net profit to $724 million, underpinned by insurance earnings. QBE Insurance, which generates a fraction of earnings from Australia, last week posted a 13 per cent increase in first-half profit to $US760 million.
At IAG, the Australian businesses were able to lift insurance revenue by pushing through higher costs and growing market share.
The insurer delivered stronger-than-expected growth of 12 per cent in premium income, particularly across home and motor insurance. Group-wide the insurance margin of 10.6 per cent was up from 9.1 per cent last year.
Mr Wilkins said premium revenue should increase between 9 and 11 per cent over the next year. At the same time IAG lifted its insurance margin guidance to a range of 11 to 13 per cent.
This helped support IAG shares. At 1.15pm AEST shares in IAG were trading 12¢ higher at $3.96.
In May IAG detailed plans to push ahead with a formal review of its loss-making British business Equity Red Star, in a move that could lead to an exit from the troubled market.
At the time Mr Wilkins said the outcome of the review could include a sale or a refinement of its business strategy to focus more on motor insurance.
IAG had been planning to update the market on progress of the review with the release of today’s full year results, although Mr Wilkins now said review was now likely to be finalised toward the end of the calendar year.
“We are close to restoring profitability in the UK,” he said. The British business posted an insurance loss of $13 million for the fiscal year. This was a sharp turnaround from the $181 million loss a year earlier. It should deliver a modest profit in fiscal 2013, Mr Wilkins said.
While Equity Red Star remains a headache, IAG continues its push into the faster-growing Asian region, investing in businesses in Malaysia, Vietnam and India.
IAG declared a fully-franked final dividend of 12¢ a share, up from 7¢ for the same period in the previous year.