Insurance Australia Group, the parent of the Lloyd's of London insurer Equity Red Star, reported worse-than-expected losses in the UK yesterday as it struggles with soaring injury claims.
The company said its British arm suffered a A$121m (£76m) insurance loss in the six months to 31 December. It warned that the hit would affect wider group half-year results, with net profits now expected to more than halve, while it also trimmed full-year expectations as the costs from the recent severe floods in Australia mount.
IAG has struggled in the UK in recent years as the rise of "no win, no fee" claims handlers has sent injury cases rocketing.
The insurer has increased rates by up to 20 per cent across its private motor books, and warned of more "significant" rises to come as it steps up action to tackle UK losses. However, IAG was also hit by an A$11m bill for winter claims in the UK after the severe December weather.
The wider parent company, which is Australia's biggest home and car insurer, said it was also facing about A$300m so far in weather-related claims – largely because of the widespread damage caused by last month's floods in Queensland, northern New South Wales and Victoria.
IAG launched a turnaround plan last June to help return the UK business to health. As well as increasing rates, it has withdrawn from unprofitable areas, quitting more than 230 broker relationships in recent months.