I. Divisional result
The division contributed a total profit of $21 million, including shares of associates and allocated costs. This compares to a $14
million profit in the prior financial year, and comprises:
strong underlying performances by the established businesses in Thailand and Malaysia;
an improved operating performance from each of the developing businesses in India, China and Vietnam;
a favourable movement in mark-to-market valuations of investments, including those within associates’ shareholders’ funds; and
modestly higher regional support and development costs of $32 million (2014-$31 million).
Asia saw strong growth in consolidated GWP of over 11%, driven by a resumption of growth in Thailand, as more stable political
conditions benefited economic activity. IAG now participates in a gross regional annualised GWP pool of nearly $1.7 billion, an
increase of over 13% compared to the prior year.
II. Controlled entities
GWP from the Group's controlled entities was $353 million, which was an increase of over 11% on the corresponding prior financial
year (2014-$317 million), within this:
the Thai business (Safety Insurance) reported an increase in GWP of nearly 16% to $334 million from $288 million for the prior
year, reflecting increased focus on the used car market, improved renewal retention, softening rates in the commercial motor and
property segments and improved domestic demand; and
AAA Assurance in Vietnam recorded GWP equivalent to $18 million (2014-$29 million). The decline of nearly 40% follows the
decision to withdraw from the distribution of loan protection insurance with a bank partner on profitability grounds, which took
effect from the end of the first quarter of the financial year.
The insurance profit delivered by the controlled entities for the current year was $17 million (2014-$23 million) excluding allocated
costs. Within this:
the Thai business reported an insurance profit of $15 million, compared to $28 million in the corresponding prior year. The
reduction was driven by a higher incidence of large fire losses, the absence of prior year reserve releases, and increased
commission costs;
AAA Assurance contributed an insurance profit of $2 million (2014-$5 million loss); and
there was a negligible contribution from Parolamas in Indonesia, which was consolidated by IAG from May 2015. Parolamas has
a GWP base of approximately $12 million per annum.
III. Share of net profit/(loss) of associates
The Group's share of associates was a profit of $36 million (2014-$22 million), excluding allocated costs and before amortisation.
This result includes AmGeneral Holdings Berhad (AmGeneral) in Malaysia, SBI General Insurance Company Limited (SBI General) in
India, and Bohai Insurance. AmGeneral accounts for the majority of the Group's share of net profit from associates. IAG’s share of
AmGeneral's profit for the current year increased by over 34% to $39 million (2014-$29 million), with higher prior period reserve
releases, higher income owing to a favourable mark-to-market movement on the bond portfolio and lower mark-to-market losses
recognised on the investments backing shareholders' funds all contributing.
E. CORPORATE AND OTHER
Revenue has decreased from $411 million in the prior year to $249 million in the financial year ended 30 June 2015. A pre- tax loss
of $189 million was reported, which compares to a profit of $209 million in the corresponding prior year. The movements are
predominantly due to lower investment income on shareholders’ funds, net of investment fees, and increased pre-tax net corporate
expenses. The current year result includes $155 million of costs, which primarily comprises restructuring costs in respect of the new
operating model in Australia (implemented from 1 July 2014) and integration costs associated with the acquisition of the former
Wesfarmers business.
Further details on the operating segments are set out in the segment reporting note within the Financial Statements.
REVIEW OF FINANCIAL CONDITION
A. FINANCIAL POSITION
The total assets of the Group as at 30 June 2015 were $31,402 million compared to $29,748 million at 30 June 2014. Movements
within the overall increase of $1,654 million include:
an increase in deferred reinsurance premium of $1,117 million, predominantly relating to recognition of the Berkshire Hathaway
quota share agreement for unearned premium ceded at reporting date;
an increase in reinsurance and other recoveries receivable of $465 million, mainly attributable to the Brisbane hail storm and
NSW east coast low events; and
an increase in investments of $158 million from the funds inflow associated with the equity placement to Berkshire Hathaway in
June 2015 and strong investment returns achieved on the technical reserves portfolio, offset by claim payments from natural peril
events.
The total liabilities of the Group as at 30 June 2015 were $24,384 million compared to $22,954 million at 30 June 2014. The
increase in liabilities of $1,430 million is mainly attributable to:
a $681 million increase in gross outstanding claims, predominantly due to the heightened natural perils activity in Australia and
lower discount rates impacting claim reserves on long tail classes; and
an increase in reinsurance premium payable of $884 million, primarily as a result of the Berkshire Hathaway quota share
agreement.
10 IAG ANNUAL REPORT 2015
