Promina beats its forecast by $100m

By PAM GRAHAM

Insurer Promina has received $12.7 million of claims from the flood ravaged lower North Island and expects the figure to rise to $20 million.

The Australasian insurer is well placed to handle the cost after yesterday reporting an annual profit of A$298 million ($336.5 million), about A$100 million more than predicted in its prospectus last year.

The flood claims were within expectations of weather-related events for this time of the year, managing director Michael Wilkins said.


Last year, bush fires and a storm in Melbourne were one-off events, but their cost to Promina was offset by an otherwise benign claims environment in general insurance.

The Australasian businesses floated by Britain's Royal & Sun Alliance, whose brands include Vero and AAMI, were operating in what was described as a "rational and sensible market".

Insurers associated with price cutting had collapsed in Australia and in New Zealand the company was the second-biggest insurer.

Wilkins said the deal with the British parent to buy the New Zealand businesses was "a bargain frankly".

Promina said claims conditions in Australasia were "more normal" last year because dry weather reduced traffic-related claims.

Promina does not release a New Zealand profit figure, but the margin on its general insurance business here rose from 6 per cent to 14.1 per cent.

The company is signalling that it will play a role in changing the life insurance market in New Zealand where commission structures make new business expensive to insurers.

"Our [New Zealand life insurance] business is not performing as we would like it to. We're moving to do our part to try to change that position."

The company is making a 14 per cent return on capital and premiums are being set to assume a 15 per cent return.

The company beat its forecast because of more normal claims and because general insurance and investments did better than expected.

Fund manager New Zealand Guardian Trust was a "good little earner".

Promina also announced plans to raise A$250 million to A$300 million of debt or hybrid capital.

It was not ruling out acquisitions but talked of organic growth.

The company's directors have declared a fully franked final dividend of A9c a share, which will be payable on April 15.