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(Reuters) — Insurance Australia Group on Friday said it was exploring opportunities for a bigger presence in China and would scale back its investment in regional Chinese insurer.
The remarks come after the company posted a 41% drop in full-year net profit and slashed its dividend due to record claim costs from storms last year, sending its shares down 5%.
IAG said it will cut its ownership in Tianjin-headquartered Bohai Insurance, which currently provides it with a regional presence in China, to under 14% from 20% now.
"We continue to see opportunities in China as being very attractive to us," CEO Mike Wilkins told reporters on a post-earnings call. "We believe the better way is to explore a national presence rather than a regional presence that we have."
Net profit for IAG, in which Warren Buffett's Berkshire Hathaway Inc. owns a 3.7% stake, fell to 728 million Australian dollars ($537.1 million) compared with AU$1.23 billion ($1.16 billion) a year ago. It had claim costs of AU$1.05 billion ($774.6 million).
Insurance profit fell 30% and it cut its final dividend by 10 cents to 16 cents a share. It had a reported insurance margin of 10.7% for the year, at the lower end of its target range of 10.5% to 12.5%.
IAG reaffirmed guidance for a reported insurance margin of 14%-16% in the current business year but cut its outlook for gross written premium growth to flat from earlier expectations of an up to 3% increase, citing challenging market conditions and subdued inflationary pressures.
Earlier this week, Australia's biggest insurer by premium income, QBE Insurance Group Ltd., posted a 24% rise in first-half net profit, helped by gains from the sale of noncore assets.
A former QBE North America executive and a consultant are accused of embezzling $2.6 million from the insurer through fake contracts and spending the money on expensive homes and cars, according to the U.S. attorney's office for the Southern District of New York.