IAG's profit in New Zealand tops $200m

IAG has completed more than $3.9 billion in claim settlements in respect of the Canterbury earthquakes.

More-settled seismic activity helps major insurance company’s result.

New Zealand profit for the country's biggest general insurer, Insurance Australia Group, rose from A$92 million to A$193 million ($200.1 million).

IAG described the result for the six months ended December 31 as "significant", gave an update on Canterbury and explained why it made so much more, which was partly due to more-settled seismic activity.

"The higher reported insurance margin in 1H15 reflects the combination of relatively benign natural peril activity, continued focus on pricing and underwriting discipline, and the realisation of ongoing operational improvements across the business," it said.

"The New Zealand business continues to deliver a strong underlying margin, as it balances customer affordability with high regulatory and reinsurance costs in a highly competitive market.

"The business remains focused on providing flexible product and pricing offerings to support customers and ensure they can maintain insurance coverage."

But the wider group experienced a profit drop from A$758 million to A$693 million, although gross written premiums rose from A$4.7 billion to A$5.6 billion.

That result came from all operations including Australia, New Zealand, Thailand and Vietnam, where IAG employs more than 15,000 people.

While many Canterbury people are still struggling to get resolution on their insurance claims, IAG indicated its New Zealand returns were robust.

"New Zealand has continued to register a strong underlying performance, while the reported margin of 19.2 per cent was enhanced by a particularly benign natural perils experience. The business has maintained its market-leading position, with gross written premium growth of 26.2 per cent centred on the acquired Wesfarmers business," it said.

"Modest like-for-like growth in personal lines was countered by some volume loss as a result of tougher commercial market conditions."

IAG has the State, NZI, AMI and Lumley Insurance brands here and noted the integration of Lumley Insurance business progressing to plan.

IAG said there had been solid progress on the Canterbury rebuild, with an increase in expected gross claim costs, but within reinsurance cover.

New Zealand's first-half gross written premiums of $1.2 billion increased by 22.2 per cent compared with the same period last year, reflecting the first six months' contribution from Lumley Insurance following its acquisition as part of the Wesfarmers transaction.

On the Canterbury rebuild, IAG said it had advised in December that there had been a significant increase in the expected final claim cost arising from the earthquakes.

"This 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 residential dwelling limit, and a series of adverse court judgments which have affected the insurance industry over the past six months."

"Of the $950 million increase recognised, the majority relates to the February 22, 2011, event. Gross claim reserves for this event now stand close to the applicable reinsurance limit of $4 billion. Loss estimates for the other major earthquake events are expected to settle well below respective reinsurance limits."

The firm had completed over $3.9 billion in claim settlements in respect of the Canterbury quakes as at December 31. Approximately 69 per cent of all claims by number had been fully settled at that date.