By Alice Uribe

SYDNEY--Insurance Australia Group Ltd. logged an almost 60% drop in full-year profit with its insurance margin falling short of guidance, as the insurer grappled with destructive weather events and market volatility amid the ongoing pandemic.

The Australia and New Zealand-focused general insurer on Friday reported a profit of 435 million Australian dollars (US$314.7 million) for the 12 months through June, down from A$1.08 billion. IAG confirmed it would not pay a final dividend and didn't provide any forecasts for 2020-21.

IAG, which pre-announced its results on July 24, confirmed its insurance profit was down almost 40% to A$741 million, after seeing its investment income take a hit amid volatile markets. It logged a A$181 million annual loss on shareholders' funds income versus a A$227 million profit in the previous year.

The insurer's reported insurance margin softened to 10.1%, from 16.9% in fiscal 2019, driven partly by the inclusion of net natural peril claim costs of A$904 million. The costs were above updated guidance of A$850 million provided in February following higher-than-anticipated attritional perils experience in the final quarter of the fiscal year.

IAG, which operates brands including NRMA Insurance and CGU Insurance, said gross written premium rose by 1.1% versus 3.1% growth in the prior year.

"Our top line GWP growth was in line with our guidance, despite incurring a slight negative effect from Covid-19 in the second half from lower new business volumes," said Chief Executive Peter Harmer.

IAG said second-half Covid-19 costs, which include a A$100 million provisions for potential claims, were largely offset by a benefit of A$150 million from lower motor claims, mainly in April and May.

Management said it had strengthened reserves mainly in areas of liability, professional risks and workers' compensation, and credit spread effects.

IAG's sale of its 26% stake in Indian company SBI General Insurance Company for A$640 million completed in March. In its annual results on Friday, IAG confirmed a total profit after tax of A$326 million, above its initial guide of A$300 million.

Mr. Harmer said this was offset by customer refunds provision of A$141 million for the full year compared to an initial A$82 million recognized in the first half. The provision relates to multi-year pricing issues identified where some customers didn't always receive the full discounts they were entitled to, said IAG.

IAG said its Common Equity Tier 1 was "comfortably above benchmark," despite not declaring a final dividend.

In April, IAG announced that Mr. Harmer would retire as chief executive at the end of this year. No replacement has been named yet. 



  Write to Alice Uribe at alice.uribe@wsj.com