Insurance Australia Group Ltd. joined the growing ranks of insurers reporting strong profits. The group, which includes Insurance Australia Ltd. the successor to NRMA, the country’s largest auto insurer, reported full year, 2002-03, net profits of A$153 million (U.S. $100 million) on premium revenues of A$4.89 billion (U.S.$3.2 billion), almost a 30 percent increase.
Standard & Poor’s issued a statement indicating that the results were broadly in line with its expectations, and were “consistent with its ‘AA’ insurer financial strength and counterparty credit ratings.”
S&P credit analyst Paul Clarkson, noted, “The full-year operating result benefited from a good operating environment in the Australian general insurance market, with lower claims ratio, through favorable weather conditions and a change in the company’s business mix, despite some investment income volatility.”
A report from Dow Jones Newswire cited remarks by CEO Michael Hawker that given the current low interest rates IAG had revised its target for its combined operating ratio and now expects it to be in the 93 to 96 percent range over the next 12 months. He also indicated that achieving that target would enable IAG to “maintain an insurance target of 9%-12%” over the period.
S&P also noted that “Insurance Australia Group has strong business positions in both Australia and New Zealand, further helped by the recent acquisitions of CGU Insurance Ltd. and New Zealand Insurance Ltd., demonstrating leading market positions in both these countries. Integration of the acquired businesses continues and is on track to realize the targeted pretax A$160 million [U.S.$104.5 million] in sustainable synergy benefits. Capital levels remain robust and within the rating tolerance, backed up by conservative reserving levels.”
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