Australian based NZX listed Insurance Australia Group (IAG) has announced reduced half-year profits for six months to December, year but is confident of posting an improved full year result to June 2012.

Mother nature delivered a turbulent year for insurance companies. The Christchurch earthquakes saw IAG pay out only $A8 million, with the vast bulk of claims covered by reinsurance, but unexpected storms in Victoria cost a total of $A190 million.

Total natural peril claim costs totalled $A396 million and exceeded allowances by $A130 million.

An insurance profit of $A271 million for the six months ending December 31 2011 is a 42.3% decrease on the $A470 million insurance profit for the six months ending December 31 2010.

Net profit after tax was down 10% to $A144 million from a 2011 first half profit of $A161 million.

Gross written premium grew 9.7% to $A4.3 billion.

The insurance margin for the first half of the 2012 financial year was 7.1% compared to 12.1% for the first half of 2011.

The groups underlying margin improved from 9.4% for the first half of 2011 to 10.7% in the first half of the 2012 financial year.

In a statement ceo Mike Wilkins says the Group expects to deliver a full year insurance margin within its original guidance, despite net natural peril claim costs and credit spreads dragging performance down compared to the first six months of 2011.

“We expect to deliver an insurance margin at the lower end of our original guidance of 10-12% given credit spreads have taken 100 basis points off our margin on a full year basis. This guidance includes an increase in our forecast net natural peril claim costs for the year, offset by a slightly higher reserve release assumption,” Mr Wilkins says.

Guidance assumes a net natural peril claim cost of $A630 million for the year, no further movement in investment markets and that reserve releases are slightly above 2% of net earned premium.

Shares last traded on the NZX at $1.03.