IAG New Zealand boosts annual profit

By Paul McBeth

Aug. 8 (BusinessDesk) - Insurance Australia Group's New Zealand division benefited from good weather in the past year, with a lack of natural peril claims and ongoing gross written premium growth driving a 79 percent jump in annual earnings.

The local unit reported an insurance profit of A$390 million in the year ended June 30, up from A$218 million a year earlier. Net claims from natural events - referred to as natural perils - were just A$15 million compared to A$100 million a year earlier. That saw total claims by policyholders fall to just A$846 million from A$975 million a year earlier.

Gross written premiums were up 7 percent at A$2.66 billion, although in New Zealand currency terms, the gain was 5.2 percent at NZ$2.84 billion.

"New Zealand maintained its record of strong profitability and sound growth, reinforcing its position as the country's leading general insurer," IAG said.

Insurance Council of New Zealand data show just four natural disaster events in the June 2019 year at a total cost of $14.7 million. There were nine events at a total cost of $263.4 million in the 2018 year. Excluding the estimated $2.12 billion cost of the Kaikoura quake, the 10 other natural events in the June 2017 year cost the industry $213.7 million.

IAG New Zealand's underlying earnings outperformed the group. IAG's total insurance profit was down 13 percent at A$1.22 billion as a number of storms in Australia boosted payouts on natural peril events. Net profit was up 17 percent at A$1.08 billion, including a A$200 million gain on the sale of its operations in Thailand.

The parent company's board declared a final dividend of 20 Australian cents per share, taking the annual payout to 37.5 cents, up from 34 cents a year earlier. That included a 5.5 cent special dividend.

The ASX-listed shares dropped 4.2 percent to A$7.74 in early trading.

The local division earnings were also boosted by reserve strengthening last year not being repeated. Investment income on reserves rose to A$36 million from A$9 million a year earlier.

IAG New Zealand's consumer premiums rose 4.9 percent in New Zealand dollar terms, led by increased rates and volumes for private motor policies and higher rates for home policies. Business premiums rose 5.5 percent, led by higher rates and volumes for commercial vehicle policies.

The local company's premium growth lagged that of nearest rival - Suncorp New Zealand - which yesterday reported an 8.4 percent increase.

IAG New Zealand's spending on commissions increased 2.3 percent to A$179 million, whereas Suncorp's acquisition costs climbed 14 percent to NZ$322 million.

IAG expects the underlying profitability of the New Zealand business to stay strong despite the market remaining competitive in the 2020 financial year.

Sound gross written premium growth is expected "in both consumer and business, comprising a combination of volume growth and rate increases, with the latter expected to be at lower levels than those experienced in FY19," it said.

IAG New Zealand chair Hugh Fletcher will retire from the boards of the local subsidiary and parent company at this year's annual meeting. He has chaired IAG New Zealand since 2003 and joined the IAG board in 2007.

© Scoop Media