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IAG lifts expected Canterbury quake claim costs by up to $1 bln

Tuesday 23rd December 2014

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Insurance Australia Group, New Zealand's biggest general insurer, expects as much as $1 billion more in final claims from the 2010 and 2011 Canterbury earthquakes that levelled the country's second biggest city due to an increase in forecast rebuild costs and a number of adverse court judgments.

The Sydney-based company anticipates final claims from the quakes to increase by between $750 million and $1 billion, though still expects those claims to fall within its $4 billion reinsurance limit, it said in a statement. The bulk of the increase relates to the Feb. 22 2011 quake, which IAG anticipates will exceed the $3.25 billion reinsurance cover but losses from the other quakes are expected to fall within the broader programme.

"The reassessment of expected final claim amounts follows an increase in forecast repair and rebuild costs, the continued notification of new household claims that have exceeded the Earthquake Commission's $100,000 limit, and a series of adverse court judgments which have impacted the insurance industry over the past six months," the company said.

IAG's New Zealand division, whose local brands include State, NZI and AMI, increased earnings to A$183 million in the 12 months ended June 30, from A$117 million the year earlier, with gross written premium revenue up 17 percent to A$1.85 billion. The insurance margin increased to 11.5 percent from 8.9 percent in 2013.

The insurer today affirmed guidance for full year insurance margin of between 13.5 percent and 15.5 percent.

In August, IAG said it had settled about 58 percent of its Canterbury earthquake claims as at June 30, amounting to more than $3.3 billion in claim settlements. Projects are taking longer than expected and the company expects the rebuild completion date to extend out to mid-2016, later than the previous target.

The ASX-listed shares rose 0.8 percent to A$6.40, and have gained 9.1 percent this year.


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