NEWSFLASH: Strong results for insurance giant

by IBO 19 Aug 2014

NEWSFLASH: Strong results for insurance giant

A strong performance by the New Zealand arm of IAG reflects good momentum in the local economy, disciplined underwriting and pricing in a competitive market and a strong focus on delivering customer experiences, says IAG NZ CEO Jacki Johnson.
 
Local currency GWP of NZ$2,040 million grew 3.7% compared to FY13 NZ$1,968m with all distribution channels reporting growth in FY14.
 
GWP growth was driven by:
 
- rate increases in the domestic home owners’ portfolio across all channels to continue to recover higher reinsurance costs and appropriately priced risk;
 
- a continued focus on customer and sales initiatives which contributed to improved volumes compared to FY13.
 
One of these initiatives includes the development of the online channel which, within the direct channel, experienced an increase in website traffic of around 23% since FY13 and now accounts for over 25% of State’s private new motor business sales.
 
Full year reported GWP growth of 17.2% to $1,846m included a significantly favourable exchange rate effect compared to FY13.
 
Reported margin rose to 11.5% (FY13: 8.9%) despite the impact of a number of heavy rain and storm events which led to natural peril claim costs being well above the related allowance.
 
The underlying margin improved to 14.8%.
 
The integration of AMI was completed with related annual synergies of NZ$35m realised by the end of June 2014, ahead of the expected NZ$30m.
 
Progress on the Canterbury rebuild saw over NZ$3.3 billion of claims paid, 58% settled by number, however complexities have pushed the completion date out by six months to mid-2016.
 
Johnson said that underlying profitability was expected to remain strong as IAG focused on improving operational efficiencies.
 
She said: "Settling claims relating to the Canterbury earthquakes continues as our most pressing priority, while considerable attention is also being given to welcoming Lumley employees and customers into IAG and leveraging the strengths of both businesses."
 
The strong divisional results reflect a strong overall performance for the whole group.
 
The group reported an insurance profit of A$1,579m for the financial year ended June 30 2014, which put the insurer 10.6% up on the A$1,428m it recorded during the preceding 2013 financial year.

This reflected an insurance margin of 18.3%, up from 17.2% during the 2013 financial year, while underlying margins jumped from 14.2% to 12.5%.
 
Meanwhile, IAG reported GWP increased by 3% to $9,779m, while net earned premium rose by 3.9% to A$8,644m.
 
Net profit after tax increased 59% to A$1,233m, up from A$776m during the last financial year.

Group CEO Mike Wilkins used the opportunity to throw down the gauntlet to commercial insurance competitors, following the acquisition of businesses trading under the WFI and Lumley brands.
 
“The acquisition of the Wesfarmers insurance underwriting business was completed on 30 June 2014," Wilkins said.
 
“It delivers market leadership in commercial insurance in Australia and consolidates IAG’s market leadership in New Zealand,” he said.
 
Wilkins said that, on the back of changes within the business, IAG was well-placed to deliver strong financial performance over the longer term.