Osso in the firing line
REMARKABLE RECOVERY
The big four Australian-owned banks dominate the financial services landscape in New Zealand. But IAG NZ’s latest pre-tax profit of $202.5 million suggests it could be in line to usurp AMP’s ‘‘fifth pillar’’ status as the next largest financial services firm. Having dropped as low as $5m in 2011, gross profits steadily moved upwards in 2012 and 2013 before leaping 56 per cent in the latest financial year to June 30. There’s plenty of growth to come, as IAG’s latest result does not include the acquisition of smaller rival Lumley Insurance, which took effect from July 1. The latest Companies Office records suggest the new business could contribute another $46m worth of pre-tax profit to the company coffers. The Commerce Commission justified its controversial decision to allow the merger by saying tough competition would restrain IAG from increasing prices or reducing the quality of its service. However, some commentators have said the market was beginning to resemble a ‘‘cosy duopoly’’, with Suncorp-owned Vero the only competitor of scale. Market consolidation is an undeniable driver of IAG’s recent good fortunes. In February 2012, it was given clearance to buy out Christchurchbased AMI, while leaving its earthquake liabilities for the Government deal with. The $380m investment boosted IAG’s market share significantly, while saving it $35m in the latest financial year through greater buying power and fewer premises, an even higher sum than expected. At the same time, higher premiums for homeowners have driven gross written premiums up 3.7 per cent to $2.04 billion. IAG NZ’s insurance margin, which is a key metric of profitability, has also increased from 8.9 per cent to 11.5 per cent. Its loss ratio eased from 60.1 per cent to 57.2 per cent, despite several major weather events including storms in Canterbury last year, Cyclone Ita in April, and heavy rain and storms nationwide in June. IAG’s local arm contributed 19 per cent of the overall Australian group’s gross written premium. The IAG Group posted an annual net profit of A$1.22b (NZ$1.35b), up 59 per cent on the previous year. for the country.
Crucially, it means banks will continue to lend in times of property damage, as they have something tangible to secure against.
Johnson says IAG wants to get the rebuild right the first time, to avoid further issues down the track. That means not taking any shortcuts on the likes of council and government inspections.
None of these factors are being offered as excuses, she says.
‘‘We take our responsibilities very seriously. We like feedback. We know people aren’t always happy.’’
Looking after staff while also meeting customers’ needs and keeping shareholders happy has been a major balancing act.
Have the events of the last few years taken a personal toll?
‘‘You could ask my husband that,’’ says Johnson. ‘‘He’s a nurse by background, so he’s very good at looking after my health, and making sure that I have time out.’’
As a veteran of the corporate world, she says heavy criticism from media and other parties has affected her husband and daughter more than it has her.
‘‘If you took it too personally, I’d find it very difficult to be on the ground in Christchurch to do my job,’’ says Johnson.
‘‘There are times when you can’t stick your head above the parapet either, and protest too much.
‘‘I tell my people, keep doing the job we’re supposed to be doing.’’
If all goes according to plan, Johnson says she believes Christchurch will eventually become one of the safest and most insurable cities in the world.
Whatever happens, she intends to see it through to the end: ‘‘I never think of throwing it in, ever.’’
Johnson’s mates from her medical days can’t believe she’s stayed in the insurance business for 25 years.
She tells them she’s doing it for the same reason she chose to become a therapist – to make a difference in people’s lives.
‘‘I ultimately believe in the social and economic purpose of insurance. Otherwise you wouldn’t stay in it, if you thought it was just a capital-gaining process.’’