The numbers.

Gross written premium (GWP) was $5,543 million, reflecting the difficult commercial market conditions and lower Compulsory Third Party (CTP) volumes offset by growth in consumer premium and sound growth in Asia.

An underlying margin of 14.2% demonstrates the Group’s strong profitability.

The Berkshire Hathaway quota share arrangement that came into effect on 1 July 2015 had a broadly neutral effect on our insurance profit, and a favourable effect of around 250 basis points on our underlying margin, in line with our expectations.

The reported first half insurance margin of 14.9% also includes:

• net natural peril claim costs of $278 million, $22 million lower than the related allowance and after a benefit of approximately $130 million of recoveries under our catastrophe aggregate reinsurance cover;
• an adverse credit spread impact of $15 million; and
• prior period reserve releases of $60 million, equivalent to 1.5% of net earned premium, from higher than expected CTP releases and a NZ$150 million increase to the risk margin relating to the February 2011 Canterbury earthquake.

Net profit after tax of $466 million was 19.5% lower than for the same period last year, including a significantly lower contribution from investment income on shareholders’ funds due to weaker equity markets in the period.

Divisional results

The Australian Consumer Division, which represented 51% of Group GWP, performed well with an underlying margin of 15.5%. The divisions reported margin of 24.6% included reserve releases significantly above long term expectations, at over 8% of net earned premium. The division also enjoyed a favourable natural perils outcome compared to allowance. GWP growth of 1.6% reflected advances in short tail home and motor lines, partially offset by lower CTP volumes.

The Australian Consumer Division saw a 6.3% contraction in GWP, with a continuation of tough commercial market conditions pushing average rates lower, and strict adherence to underwriting disciplines contributing to lower volumes. The business maintained a double digit underlying margin of 10.7%, assisted by the quota share effect, with synergies from the Wesfarmers integration partially offsetting pressures from the market environment. The reported margin of 8.4% was lower than the underlying margin following an adverse perils experience compared to allowance.

New Zealand continues to perform well, registering a strong underlying margin of 18.4%. The lower reported margin of 1.4% reflects the increased risk margin for the February 2011 earthquake event, partially offset by a relatively benign natural perils experience. The business has maintained its market-leading position, with modest premium growth in direct personal lines more than offset by the tougher market conditions in the commercial segment, combining to produce a 4.1% decline in GWP.

Asia saw GWP growth of more than 20%, with sound growth in Thailand amplified by a favourable foreign exchange effect. This half also saw the first full six months' contribution from the small business acquired in Indonesia. Asia's overall earnings contribution was $10 million, pushed lower by adverse mark-to-market movements on investments.