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Insurer sells stock at 13% discount

INSURANCE Australia Group Ltd, the nation's largest insurer of cars and houses, is selling A$500 million (US$319 million) in shares at a 13-percent discount after first-half profit was almost wiped out by investment losses.

Net income probably dropped to A$4 million in the six months ended December 31 from A$110 million a year earlier, the Sydney-based company said yesterday in a preliminary earnings statement.

The rising price of credit cut earnings by A$86 million, while claim costs for natural disasters exceeded the group's first-half allowances by A$23 million, it said, due to storms in New Zealand and southeast Queensland, Bloomberg News reported.

"We see these capital management initiatives as a prudent means of providing the group with additional financial flexibility in an environment where financial market conditions remain challenging," Chief Executive Office Michael Wilkins said in the statement.

Wilkins, who took over as CEO in May last year, has seen credit costs widen and investment losses increase, overshadowing higher insurance earnings. The company said it expects an insurance margin of 6.2 percent in the first half, from 5.1 percent a year earlier, on insurance profit of A$227 million.


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