IAG profit surges higher

RICHARD MEADOWS
Last updated 13:01 19/08/2014

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IAG New Zealand's profit has leapt past $200 million before tax, up 56 per cent on the back of higher margins and a lower loss ratio.

The Australian-owned company is the largest general insurer in New Zealand, trading under the State, NZI and AMI brands.

Gross written premiums rose 17.2 per cent to A$1.85 billion (NZ$2.03b) in the year to June 30, in part because of favourable exchange rate movements.

The company said the result was also driven by increasing rates for homeowners "across all channels" in order to continue to recover higher reinsurance costs.

IAG NZ's insurance margin increased from 8.9 per cent to 11.5 per cent and its loss ratio eased from 60.1 per cent to 57.2 per cent.

That was despite a higher number of weather events in the year, including storms in Canterbury last year, Cyclone Ita in April, and heavy rain and storms nationwide in June.

IAG NZ chief executive Jacki Johnson was not available for an interview.

She has previously said that she could not promise premiums would not continue to rise as they were dependent on reinsurance costs and weather.

"I'm not avoiding your question; it's just that you can't give guarantees if you can't predict the weather and all the natural events," she said.

Johnson also previously said that IAG was mindful of the affordability of insurance but had to price correctly for the risks it faced.

She said in a statement today that underlying profitability was expected to remain strong as IAG focused on "improving operational efficiencies".

Johnson said settling Canterbury earthquake claims continued to be the most pressing priority.

As at June 30, IAG had completed more than $3.3b of settlements, representing about 58 per cent of all claims.

A much higher proportion of commercial losses, 84 per cent, had been settled.

The company said it expected all residential rebuilds would be under way by the end of next year, but pushed out its expected completion date to mid-2016.

Johnson said that in the year ahead considerable attention would be given to integrating Lumley Insurance employees and customers, and leveraging the strengths of both businesses.

The annual result does not include the acquisition of Lumley, which took effect from July 1.

With the Commerce's Commission approval, IAG now has about a 50 per cent share of the New Zealand insurance market and two-thirds of the vehicle and home and contents market.

The commission concluded that tough competition would restrain it from increasing prices or reducing the quality of its service.

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The IAG Group as a whole posted an annual net profit of A$1.22b (NZ$1.35b), up by 59 per cent on the previous year.

That was in part through the removal of the loss-making British business, which was sold in April 2013.

The board announced a final dividend of A26 cents a share, bringing the full payout to A39c, up 8.3 per cent.

- Stuff

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