Increased claims from natural perils, up 22% from the previous year
While paying claims for damage from storms and other natural perils is a normal part of doing business for an insurer, IAG’s businesses incurred $502 million natural perils claims costs, which is 22% more than the $411 million incurred last year. Competitive conditions in key markets
Soft conditions continued in some of our key markets, impacting our financial performance, in particular the Australian and NZ commercial insurance and the United Kingdom (UK) motor insurance markets.
Reduced investment returns
Income on shareholders’ funds reduced to $24 million compared to $301 million in the previous year. Deteriorating credit markets adversely impacted the value of our bond holdings, however we expect to recover this over time. This reduced our insurance margin by 1.7%.Restructuring costs
We have implemented changes to our corporate strategy and cost savings initiatives to improve our performance. We incurred $350 million in impairment charges related to our plan to scale back our UK operations, and the initiatives implemented in our Australian businesses have resulted in a before tax restructuring cost of around $60 million. The benefits of these changes will be visible in the 2009 financial year and beyond.
