Australian insurer posts much-improved six-month results, reducing COR to 102.8%

Mike Wilkins IAG

Australian insurer IAG has silenced analyst criticism of its UK business after the troubled division posted a much-improved result for the first half of its 2012 financial year.

IAG UK, the bulk of which is Lloyd’s motor insurer Equity Red Star, made a divisional loss of A$7m (£4.7m) in the six months to 30 December 2011 - a big improvement on the A$119m loss it posted in the first half of the 2011 financial year. 

The UK arm’s combined ratio was 102.8% in the first half of 2012, compared with 142.3% in the first half of 2011.

IAG group chief executive Mike Wilkins said: “We remain confident that this business will deliver a result close to break-even for the full financial year.” The figures benefited from reserve releases in the “single-digit millions”. But Wilkins described these as “negligible”.

IAG results

Wilkins attributed the UK turnaround to several actions, including raising prices and withdrawing from aggregator-originated business and unprofitable broker relationships.

At the results conference call, Wilkins faced relatively few analyst questions about the UK business and none about its future as part of the group.

At previous results conferences, Wilkins has been questioned about how long IAG would tolerate the unit’s poor performance.

In January, Lloyd’s fined Equity Syndicate Management £95,000 for a series of reserving blunders.