Insurance Australia Group says it expects to report a drop in annual profit in fiscal 2010 and has made changes to its executive team, as it says it also expects an improved performance in fiscal 2011.
Annual profit to June 30 will be $91 million, down from $181 million in fiscal 2009, IAG said in a statement today.
IAG shares fell as much as 5.1 per cent, or 18 cents, to $3.32 in early trading.
The profit announcement comes a day after rival insurer QBE surprised markets by cutting its earnings forecast in part because of lower-than-expected interest rates. That announcement sent QBE shares down to a 16-month low.
Insurance margins for the year to June 30 would be 7 per cent, in line with guidance, the company said.
IAG said it expects to announce an insurance profit of $493 million for the year, down from $515 million in fiscal 2009.
This would be achieved on net earned premium of $7.1 billion, down from $7.2 billion in 2009, it said.
IAG would pay a final dividend of 4.5 cents, fully franked.
Outlook hopes
IAG chief executive Mike Wilkins said the FY10 result showed a further uplift in the underlying performance of the group's Australian and New Zealand businesses during the year.
"While this year's financial result does not reflect the expectations we held at the outset of the year, I'm encouraged by the clear and ongoing improvement in the operational performance of our businesses in our home markets of Australia and New Zealand," he said in a statement.
"The results of these three businesses, which represent almost 90 per cent of our GWP, have improved year on year, providing evidence were continuing to benefit from our refined corporate strategy.
"The second half of the 2010 result has borne in excess of $200 million of net pre-tax claim costs in respect of the unprecedented Melbourne and Perth storms in March 2010, as well as the $367 million charge required in our UK business following the deterioration in bodily injury claim experience," the company said.
"I'm confident our performance will improve significantly in FY11.
"This is evidenced by our guidance which remains unchanged, and comprises an insurance margin of 10.5 per cent to 12.5 per cent."
Guidance for fiscal 2011 assumed losses from natural perils are in line with budgeted allowances of $435 million, no material movement in foreign exchange rates or investment markets, and lower net reserve releases (excluding the UK) than FY10, IAG said.
IAG said it would pay a fully franked, final dividend of 4.5 cents per ordinary share will, taking the full year dividend to 13 cents fully franked, after 10 cents in fiscal 2009.
‘‘We’re providing this information now, because we wanted to clarify the composition of our cash earnings and the impact on our dividend,’’ Mr Wilkins said.
‘‘After allowing for the final dividend, we remain in a strong capital position.’’
IAG also said that the head of its UK business, Neil Utley, will leave the company, receiving ‘‘non-performance based entitlements’’.
He will be replaced by Ian Foy, currently chief executive of IAG’s New Zealand business.
Jacki Johnson, currently boss of IAG’s online business, The Buzz, will succeed Mr Foy as chief executive of New Zealand.
Group executive Leona Murphy will take responsibility for The Buzz.
AAP