Weather, expenses hit insurer IAG NZ

Higher claims stemming from November’s Canterbury hailstorm and increased operating costs linked to closing its AMI offices have dragged down the profits of IAG New Zealand — the parent company of insurers State and AMI.

The New Zealand arm of the ASX-listed IAG Group business reported an insurance profit of A$330 million ($357m) for the year to June 30 — a A$60m drop on the previous year.

Gross written premiums at the country’s largest general insurer rose 3.5 per cent to A$2.754 billion ($2.836b), up from A$2.66b, driven by strong growth from its business insurance arm prompted by more policies sold and higher rates in commercial property and liability insurance.

Gross written premiums in its consumer division were flat but there was growth in its commercial motor and AMI private motor portfolios through increased rates and more policies sold.

But the business’ insurance margin was squeezed from 24.7 per cent to 20.2 per cent over the year.

This reduction was put down to higher natural peril claim costs centred on the Canterbury hailstorm, higher large claims and lower investment income.

The business had a “modest net benefit” from Covid-19, with lower motor claims countered by increased operating costs.

Those operating costs included expenses related to the AMI branch network closures, which the company put at more than A$20m.

Last month IAG New Zealand announced it would close all 53 of its AMI stores and its remaining State store, culling 65 branch manager jobs.

The closures will be phased and follow a review of its retail network.

Stores in Albany, Botany, Te Rapa in Hamilton, Mount Maunganui, Wellington, Hornby and Dunedin will remain open until the end of June next year.

The Timaru branch would remain open until November 27.

All other branches are to close on September 18.

IAG said it continued to make progress on Canterbury earthquake claims; more than $7.2 billion had been paid in settlements as of June 30.

It still had 900 claims open out of the more than 90,000 it received.

“Outstanding Canterbury earthquake claims include those subject to dispute and litigation, as well as recently received overcap claims from the Earthquake Commission.

“It remains IAG’s expectation that finalisations of all residual claims will take several years given associated complexity,” the company said.

The New Zealand business accounted for 23 per cent of the IAG Group’s gross written premiums.

IAG Group reported a nearly 60 per cent drop in its net profit after tax, which fell from A$1.076b to A$435m after the business was hit hard by high natural disaster claims and fallout from Covid-19.

Its insurance profit fell 39.5 per cent to A$741m.

The only positive in the results was a rise in gross written premiums, which were up 1.1 per cent to A$12.005b.

It will pay a dividend of A10c per share, down from A32c per share.

The insurer’s annual report also revealed that the IAG New Zealand chief executive Craig Olsen received total remuneration of A$2.029m for the year to June 30, up from A$1.836m.

His boss, IAG Group chief executive Peter Harmer, was paid A$5.743m, up from A$5.407m.