IAG announces New Zealand financial result for 2013

Media Release 22 August 2013

IAG announces New Zealand financial result for 2013

IAG’s New Zealand divisional result for the 2013 financial year, announced to the Australian Securities Exchange (ASX) today within the Group results, shows that the business has reacted and adapted well to a very dynamic environment.

New Zealand CEO Jacki Johnson says that IAG’s investment to support the shift to sum insured home policies required by reinsurers was significant (NZ$13 million), and impacted the business’s cost base, but was necessary to help New Zealand consumers understand the change and consider what they needed to do as a result. “We recognised early that this was a fundamental change that would be difficult for some homeowners to respond to. IAG decided across its brands, and working with its brokers and financial institution partners, that we had a responsibility to help our customers understand what is now required. As a result we created a major public awareness and information campaign to achieve a positive outcome from this change,” Ms Johnson said. “The Need2Know campaign has contributed to a better understanding of sum insured policies, important to getting a better outcome for homeowners, helping them to be more comfortable with establishing their insured amount, and insurers – through achieving greater certainty around our total exposure in the event of a major natural catastrophe.” A strengthening of reserves as part of IAG’s Canterbury earthquake recovery commitments, coupled with the investment in managing the home insurance changes contributed to a divisional reported insurance margin of 8.9% (10.4% FY2012).

IAG’s New Zealand insurance profit was up 11.7% to A$115 million, but off a bigger premium base. IAG’s New Zealand business increased in size – as measured by gross written premium (GWP) – by over 30% to A$1,575 million ( $1,210 million in FY2012) largely due to the first full year impact of the AMI purchase (compared to only three months worth of premiums contributing in the 2012 result). Other factors contributing to the GWP growth were necessary rate increases to recover increased reinsurance costs (notably in the home portfolio) and new and additional regulatory capital requirements. 2 of 2

The integration of AMI has been a major focus for the year and IAG reported it was on track to achieve projected synergies of at least NZ$30 million by April 2014 (two years after the acquisition). “This is an important achievement and part of our focus on managing our cost base to make sure we can keep insurance as affordable as possible,” Ms Johnson said.

Through the year NZI reinforced its strong market standing, winning intermediated Insurer of the Year for the second year in a row; and progress accelerated in Canterbury where IAG’s Canterbury Recovery team has set a target date of December 2015 to complete its residential rebuild programme, and is confident that this will be achieved. “Overall it is a result that reflects well on the efforts to maintain a strong business with an extensive network that is able to respond to the dynamic insurance environment, innovate and lead, but most importantly, through our brands and partners, to be there consistently for our customers where and when they need us.” “While there continue to be challenges emerging from Canterbury’s rebuild we are working diligently on appropriate solutions and progress is building. I have been particularly proud of the response across our brands to a number of natural disasters encountered through the year, sometimes when our own branches and people have damage by the same storms and floods that have hit our customers.” “This commitment, agility and the spirit shown by those who are part of IAG gives me great confidence in what we can achieve in the year ahead,” Jacki Johnson said.

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Full Group results details can be viewed via http://iag.com.au/results/index.shtml

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