IAG's New Zealand division boosted first-half earnings although the local business is still wearing the impact of pricier reinsurance, with the Kaikoura earthquakes costing it $117 million.

Sydney-based IAG's New Zealand business is the biggest general insurer in the country, with the AMI, State, NZI and Lumley Insurance brands on this side of the Tasman. The local division reported an insurance profit of A$36m in the six months ended December 31, up from A$11m a year earlier but down from A$193m in 2015.

Gross written premiums rose 5.4 per cent to A$1.1 billion, and reinsurance expenses fell to A$311m from A$340m, although still higher than A$143m in the first half of 2015. The local division had a reported insurance margin of 4.3 per cent, from 1.4 per cent in 2016, while its underlying margin was 15.3 per cent, from 18.4 per cent a year earlier.

In July 2015, IAG kicked off a sharing arrangement with Berkshire Hathaway where the US firm takes 20 per cent of IAG's premiums and pays 20 per cent of its claims. Last year the New Zealand unit's insurance profit was hit by a NZ$150m increase to its risk margin from the February 2011 Canterbury earthquake event. The insurer went beyond its NZ$4 billion reinsurance cover and, when reporting last year's first half, announced it had entered into a NZ$600m adverse development cover deal in excess of NZ$4.4b with Berkshire, giving it effective cover of up to NZ$5b on the February quake.

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The insurer has completed 96.5 per cent of its claims from Christchurch, valued at $6.1b, it said. Many of the remaining claims are complex or subject to litigation, and it expects them to take several years to finalise.

The Kaikoura earthquakes in November 2016 produced a net claim cost after reinsurance of $117m, with any subsequent developments covered by its 2016 catastrophe reinsurance. This led to natural peril claim costs of A$123m in the first half, from A$14m in 2016, with a A$91m impact on insurance profit and an 11 per cent impact on insurance margin for the first half.

IAG said the New Zealand division is expected to remain competitive in the second half, and it will focus on appropriately pricing risk "with added emphasis following the recent Kaikoura earthquake", while underlying profitability is expected to remain strong.

The Australian parent reported a 4.3 per cent drop in first-half profit to A$446m though it saw a 5.5 per cent gain in gross written premium to A$5.8b, with reported margin at 13.5 per cent. The board declared a fully-franked interim dividend of 13 Australian cents per share, unchanged from a year earlier, payable on March 30.

IAG lifted its full year guidance to "low single-digit growth" from the flat growth it had predicted previously, maintaining its reported margin guidance around the middle of the range between 12.5 per cent and 14.5 per cent.

The ASX-listed shares last traded at A$5.91, and gained 8.5 per cent in the past year.