IAG is targeting growth in Asia following a blowout in natural peril claims that dented full-year profit by more than 40 per cent.
Net profit for the year to June 30 was $728 million, down from $1.2 billion the previous year, after Tropical Cyclone Marcia in Queensland and damaging storms in NSW pushed natural claim costs past $1 billion for the first time.
IAG, which owns brands such as NRMA and CGU, said insurance profit was down to $1.1 billion, from $1.6 billion, and is expected to remain at the same level for 2015-16.
Shares in IAG dropped 30 cents to $5.52.
IAG's 10-year partnership with Berkshire Hathaway takes effect from July 1 and Warren Buffet's firm will pay 20 per cent of the Australian company's claims in exchange for 20 per cent of its gross written premium.
The insurer was able to reduce the amount set aside for natural peril claims in 2015-16 by $100 million to $600 million, freeing up money for its Asian investments.
"China in particular is a key focus for us as we pursue opportunities which have more of a national presence, enabling us to capitalise on a market that remains under-penetrated and with significant growth potential," chief executive Mike Wilkins said.
IAG wrote down the value of its investment in regional Chinese motor insurer Bohai Insurance by 60 per cent and Mr Wilkins said a national rather than regional approach in Asia was likely to lead to profitability.
Earnings from Asia rose 50 per cent year on year and IG markets strategist Evan Lucas said the region was performing reasonably well.
"They believe in the strategy and that's part of the reason why Warren Buffet went in there," Mr Lucas said.
"He wants exposure to Asia Pacific, not just Australia - and IAG gives him that."
Morningstar analyst David Ellis said the writedown raised questions over the strategy but that the share price fall was primarily due a soft insurance market rather scepticism over Asia.
"There was more concern on the outlook," Mr Ellis said.
"There's increased competition, there's pressure on insurance premiums; it's just generally a tough market for Australian insurers."
Mr Wilkins said IAG's underlying insurance margin remained strong at 13.1 per cent and reiterated June's forecast of between 14 and 16 per cent as the Wesfarmers insurance business acquisition is further integrated.
IAG TAKES A HIT
* Net profit down 41pct to $728m
* Insurance profit down 30pct to $1.1b
* Final fully franked dividend down 10 cents to 16 cents
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