Essays on Insurance Australia Group Limited Financial Analysis Case Study

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The paper 'Insurance Australia Group Limited Financial Analysis " is a good example of a finance and accounting case study. This is the Australian world largest insurer in general policies and reinsurance group and is also one of the top 25 re-insurers and insurers internationally. Its history dates back to more than 120 years when it began in Australia and since then it has undergone growth to include operations in over 45 nations of the world with the help of over 13,000 workforces. In 2008, the America’ s division produced above 3.8 billion in gross written premium with surplus strength of above $1.7 billion in 2008 in support of the stable, diversified portfolios in more than 40 locations covering 22 states including 4 American Latin countries.

This division underwrites diversified mix of casualty, property, including health businesses on direct, reinsurance, surplus or excess basis. The vision of this multinational organization is to be recognized as a corporation that excels in the continued delivery of new and proven services and products of indisputable quality. It is also striving for customer retention and satisfaction, employee integrity and motivation. 2007 Financial reports The highlights for the performance in the year 2007 indicate that record operating profit after tax for the half-year was up to $921 million which was higher by 56% since 2006 reported $591 billion.

The insurance profit, on the other hand, was up by 41% to $1,053million as compared to that of 2006 reported at $748 million with an insurance profit margin of 22.2% compared to that of 2006 at 18.7%. These results reflect a continual low frequency and severity of claims, increased investments yields and inclusion of recent US acquisitions for part of the half-year.

The diluted earnings per share, including hybrid securities, were up by 52% to $104.9 per share up from $69.1 per share in 2006. The shareholder's funds increased by 23% to $7,721 million since 31st December 2006. The return on average shareholder’ s fund is 28.1% while records for 2006 were 22.2% which indicate an upward trend. The cash flow on the other hand from operations was $785 million while that of 2006 was $322 million which also indicate an upward trend increase due to a generally benign claims environment and growth.

The gross written premium is up by 15% to $6,520million from $5,656 million in 2006 and this was due to acquisitions and continued high customer retention. The growth on the hand was adversely affected by increased competition, the overall weighted average reduction in premium rates of around 3% and depreciation of the US dollar. The gross earned premium was up 17% to $5,751milion which was an increase from $4,932 in 2006 while the net earnings premium was up 19%to $4,749milion while that of 2006 was $3,998million.

The reinsurance costs as a percentage of gross earned premiums were reduced to 17% while that of 2006 was 19% and this was due to increased use of equator re and our acquisitions. The maximum event retention on the largest realistic disaster scenario reduced to 3.3% of the projected 2007 net earned premium while that of 2006 was only 4%. The combined operating ratio improved to 86.2% which an up from 2006 which had recorded 87.9% while the underwriting profit is up 35% to $653milion due to premium growth and strong performance of the company’ s diversified portfolios.

The claims ratio another hand, was 55.7% while in 2006 it was 58.3%. The overall average reduction in premium rates has been offset by a continued low frequency of claims. Favorable runoff of prior accident year outstanding claims reinvested in the risk margins for 2007 while the insurance liabilities include significant allowances for the large risk claims and catastrophe losses in the second half.


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