Wednesday 23rd August 2017
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Insurance Australia Group's New Zealand division recorded a 7.4 percent decline in insurance earnings reflecting increased claims as a result of natural disasters such as the Kaikoura earthquake last November, higher working claim costs and challenging conditions in the business insurance market.
Sydney-based IAG's New Zealand business is the biggest general insurer in the country, with the AMI, State, NZI and Lumley Insurance brands on this side of the Tasman. The local division reported insurance profit of A$125 million in the 12 months ended June 30, from A$135 million a year earlier.
Gross written premiums (GWP) rose to A$2.3 billion from A$2.18 billion, which the company said reflected "strong personal lines growth" that was supplemented by improved commercial market conditions in the second half.
IAG's insurance margin in New Zealand shrank to 7.6 percent from 8.6 percent while its loss ratio climbed to 69.2 percent from 64.4 percent. Reinsurance expenses rose to A$632 million from A$623 million in 2016. In the year just reported, IAG faced "a number of natural disaster events", of which the Kaikoura quake alone generated a net claim cost after reinsurance of A$120 million. The second half of the year also saw claims from Tropical Cyclone Debbie, the upper North Island floods in March, ex-Tropical Cyclone Cook and the Port Hills fires.
"New Zealand continues to generate strong underlying performance," IAG said. "While FY17 was impacted by a deterioration in working and large claim costs, as well as the cumulative effect of competitive pricing pressure in commercial lines in 1H17, solid progress has been made to address these trends."
It said GWP growth in 2018 is expected to exceed growth in 2017 and the underlying profitability of the business "is expected to remain strong".
The parent company reported a 49 percent increase in full-year profit to A$929 million, in line with analyst expectations. However, its underlying insurance margin fell 2.1 percentage points to 11.9 percent.
Its ASX-listed shares fell 8.7 percent to A$6.17 and have gained 10 percent in the past 12 months.
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