The full year dividend of 16cps, fully franked, is a 23% increase over that paid for financial year 2010, and equates to a cash payout ratio of 67%. This is consistent with IAG's policy to pay out 50 – 70% of full year cash earnings.
UP FOR THE
My first year as Chairman has certainly not been without its challenges. An unprecedented number of natural perils contributed to the 2011 financial year being the most costly on record for insurers in Australia and New Zealand. It is a testament to IAG’s ability to manage the impact of these events that, despite them, the Group delivered an improved performance.
Group revenue for the year, measured as gross written premium, increased to $8.1 billion. The insurance margin improved to 9.1% compared with 7.0% in the prior year, and net profit after tax was $250 million, up from $91 million last year. These improvements were driven by another solid performance from our Australian and New Zealand businesses, which collectively reported an insurance margin of 12.9%.
Our Australia Direct business was a standout performer, and our Intermediated Insurance business, CGU, grew gross written premium for the first time in a number of years. These results were achieved while responding to some of the most severe weather events on record in Australia.
Similarly, customers of our New Zealand business were affected by a succession of earthquakes. Although related claim costs impacted the reported profit of our New Zealand business, once these and associated reinsurance costs are excluded, the business’ underlying performance improved.
While rebuilding is far from over for many affected by these events, I am proud of the dedication and compassion shown by our people in responding to our customers, often in very trying circumstances, as well as management’s ability to minimise the financial impact to the Group through prudent reinsurance arrangements.
Our UK operation reported a first half insurance loss of $121 million, as the local insurance industry continued to be affected by significant bodily injury claim inflation. However, the actions we have taken, led by a new management team, resulted in an encouraging improvement in the second half, with a reduced loss of $60 million. We are confident that we now have the right team and the right strategy in place to move this business towards breakeven in financial year 2012.
Our Asia division has achieved some significant milestones. We expanded the launch of our joint venture with India’s largest bank, the State Bank of India and, in August 2011, we announced we would acquire a strategic interest in a general insurer in China. Once this is complete, IAG will have a foothold in two of the fastest growing general insurance markets in the world.
The Group retained a capital position above its long term benchmark. At 30 June 2011 we held capital equivalent to 1.58 times the minimum requirement set by our regulator. We also maintained “very strong” ratings from Standard & Poor’s, with “AA–” financial strength ratings for each of our key wholly owned insurers.
Shareholders will be paid a fully franked final dividend of 7cps on 5 October 2011. This brings the total dividend for the year to 16cps, fully franked, a 23% increase on the 13cps paid for financial year 2010.
Corporate strategy reset
Achieving an improved financial performance in such a challenging operating environment demonstrates that the corporate strategy we implemented three years ago has fundamentally strengthened our organisation. In June 2011, we reset the Group’s strategic priorities. While our overall corporate strategy has not changed, our emphasis is now on accelerating growth in Australia, New Zealand and Asia.
We also remain committed to restoring profitability in the UK as quickly as possible. IAG’s board has worked closely with the executive team to agree these new priorities, and is confident with the direction that has been set.
With a view to ensuring the sustainability of our workforce, we formalised our diversity ambition during the year: “to build a workplace where we respect and value the different experiences of our people, and harness the opportunities and business benefits that diverse ideas and perspectives bring to our organisation and stakeholders”.
Our work in this area is guided by our Diversity Working Group, which consists of representatives from each of our businesses, along with our CEO, and myself. We set an early goal to increase the number of women in senior management positions to one third by 2015, and I'm pleased to report, as a result of initiatives underway, this number increased by 1% to 28% during the year. We are also working on measurable objectives in the areas of ethnicity and age.
As foreshadowed in the Chairman’s review last year, a new director, Peter Bush, joined the board in December 2010. Peter brings a wealth of experience in marketing, brands and consumer behaviour – expertise which complements the board’s skill-set.
We are satisfied the board currently has the appropriate number of directors with the right mix of skills and expertise to support the Group. However, we will continue to review its composition to ensure it best reflects the Group’s geographic and strategic focus for the future.
The improved results achieved this year, combined with our reset strategic priorities, give us confidence that we will further improve our performance in financial year 2012.
The credit for this improvement, and the underlying strengthening of the business, lies with our dedicated CEO, Mike Wilkins, and his executive team, as well as each and every employee. Their drive, commitment and hard work will ensure the future success of our company.