Insurance Australia Group (IAG) said today that it expects to announce an insurance profit of AUD493m ($445m) for financial year 2009-10, down from AUD515m the previous year, on net earned premiums of AUD7.1bn, down from AUD7.1bn in 2008-09. But net profit after tax is expected to decline some 40% to AUD91m, from AUD181m the previous year. IAG reported a continued improvement in the Australia and New Zealand businesses, with Australia Direct, headed by Andy Cornish, improving its margin. However, as announced at the beginning of June, the UK operations incurred a substantial loss. Natural perils cost AUD463m net of reinsurance, slightly up on the previous year's figure of AUD451m, and significantly higher than the budgeted AUD350m. Credit spreads narrowed over the year, which contributed AUD33m to the bottom line, compared with a loss of AUD13m in 2008-09. IAG chief executive Mike Wilkins said that he was "encouraged by the clear and ongoing improvement in the operational performance of our businesses in our home markets of Australia and New Zealand". He noted that H2 2009-2010 had seen not only the AUD367m charge because of the deterioration in UK claims (IIN 24, June 2 2010), but also more than AUD200m in claims from the "unprecedented" storms in Melbourne and Perth in March 2010. Mr Wilkins was confident of a significant improvement in IAG's bottom line in 2010-11. The insurance margin guidance for this financial year remains 10.5% to 12.5%, compared with 7% for 2009-10. The final dividend of 4.5¢ a share brings the full-year dividend to 13¢ a share, up 30% year on year, but representing a full 70% of cash earnings this year.