IAG earnings almost double despite cyclones

AUCKLAND: Insurance Australia Group’s fullyear earnings in New Zealand almost doubled despite cyclones earlier this year pushing natural peril claims beyond expectations for a second year running.

Insurance profit in New Zealand rose to $A218 million ($NZ240.6 million) in the year ended June 30, from $A125 million a year earlier, the Sydneybased company said in a statement.

IAG is this country’s biggest general insurer, with about 44% of the market. Its New Zealand brands include AMI, State, NZI and Lumley Insurance.

Growth in gross written premiums remained strong at almost 9% to $NZ2.69 billion, or 6.3% to $A2.49 billion. But commission, claims and underwriting expenses also improved, with net claims falling to $A975 million, down 15% on the year earlier which had included the Kaikoura earthquake.

IAG said that it had benefited from relatively subdued activity in the firsthalf. But a series of ‘‘significant’’ weather events — including extropical cyclones Fehi and Gita in January and February, and the April storm in Auckland — pushed total perilrelated losses for the second half to $A83 million.

That was more than four times the firsthalf figure and took the fullyear total to $A100 million — against an allowance of $A79 million. That was still down from $A182 million a year earlier.

IAG noted that exceeding the claims allowance by $A21 million had trimmed the insurance margins of the New Zealand business by 1.3%.

Despite that, the division’s insurance margin for the year climbed to 13.6%, from 7.6% a year earlier. The reported loss ratio also fell to 61.7% from 69.2% including a $A14 million foreign exchange benefit from reinsurance recoveries connected with the 2011 Canterbury quakes.

IAG’s consumer arm accounted for 58% of the premiums the group wrote in New Zealand in the past year. Its GWP increased 8% due to both rate increases and increased volumes. The AMI private motor portfolio led that growth. IAG said the business division achieved 10.2% GWP growth in the past year, reflecting improving rates, particularly for property and vehicles.

As at June 30, IAG said more than 93% of all claims from the 2016 Kaikoura quake had been settled, including more than 83% of the commercial claims. At the same date, more than $NZ6.7 billion of claims from the Canterbury quakes had been settled — more than 98% by number.

New Zealand contributed 21% of IAG’s group GWP of $A11.65 billion — 1.8% more than a year earlier.

Group net profit rose 1% to $A947 million. That excludes $A24 million of losses from businesses in Thailand, Vietnam and Indonesia IAG has agreed to sell. Higher taxes and reduced investment income meant profit was barely changed despite improved insurance profits and margins.

IAG shares fell 6% to $A7.71 on the ASX early yesterday afternoon.

The firm is expecting a profit of at least $A200 million on the asset sales and yesterday announced a plan to return about $A592 million of surplus capital to investors. The plan, subject to shareholder approval in November, is expected to return about A25c a share.

That is in addition to the A20c final dividend the firm will pay on September 27. — BusinessDesk