IAG is being punished by investors after profits crumble 10% on Brisbane storm payouts

Trees on the road in Brisbane after the storms. Robert Shakespeare/Getty Images

Insurance Australia Group (IAG) reported first half profit down 9.8% to $579 million due to an increase in natural disaster payouts.

Net natural disaster claim costs of $421 million blew out the half year allowance by $71 million and included $165 million for the November Brisbane storms.

IAG posted an insurance profit of $693 million for the six months to the end of December, down from $758 million. This equates to an insurance margin of 13.4% compared to 17.5% in the same half in 2014.

Gross written premiums increased by 17.1% to $5.6 billion, mainly due to the addition of the former Wesfarmers business.

CEO Mike Wilkins said the company was on track to deliver another solid full year performance.

“Our underlying performance has remained strong and we have made significant progress in moving to our new operating model in Australia, and integrating the former Wesfarmers business,” he said.

“This ensures we can efficiently respond to the changing business environment, while also maintaining our strong underwriting discipline.”

“Modest early synergies from the acquisition of the Wesfarmers business were realised. The company is confident it will achieve its targeted pre-tax run rates of $80 million by the end of this financial year and $230 million by the end of 2016.”

A fully franked interim dividend of 13 cents was declared.

IAG shares were down more than 6% to 5.99.

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