23 Feb 2013

IAG NZ reports lift in earnings

12:35 pm on 23 February 2013

Australian-owned insurer IAG New Zealand has reported a lift in earnings due to a full contribution from its AMI arm and higher premiums.

The country's largest general insurer bought AMI last year and includes State Insurance and NZI in its stable.

It made $A53 million in the six months to December, an increase of 56% compared with the same period a year earlier.

Premiums rose 40% to $751 million, with AMI contributing a large proportion of that, while higher reinsurance costs pushed up premiums.

Margins rose 8.3%, which also benefited from fewer natural disasters and higher reserves.

IAG chief executive officer Michael Wilkins said those margins should be sustainable in the next half year and should continue into the 2014 financial year.

Looking ahead, Mr Wilkins said premiums are expected to keep rising, though at a slower pace once AMI is excluded while it focuses on retaining customers, while underlying profitability will be driven by savings from integrating AMI and keeping costs in check.

The insurer has settled more than $1.7 billion in Canterbury earthquake-related claims, of which 70% is in the commercial sector.

Residential claims have been slower to settle, though IAG's aiming to complete them by the end of 2015 now land zoning decisions have been finalised.

IAG said AMI's integration is currently producing synergies of about $4 million in the half year, while annual synergies of a least $30 million are expected by April 2014.