Insurance Australia Group [NZX: IAG], New Zealand's largest general insurer, reported a 75 percent gain in its Kiwi operations for the first-half, as the company expects to finalise the purchase of Wesfarmers' insurance underwriting business by the second quarter of 2014.
Earnings for the division was A$93 million for the six months ended Dec. 31, up from A$53 million in the same period a year earlier, the insurer said in a statement. IAG had an 18 percent gain in its gross written premium (GWP) revenue to A$884 million. The division's insurance margin was 12.4 percent, up from 8.3 percent a year earlier
The Australian owned company, which trades in New Zealand under the State, NZI and AMI brands, is waiting for clearance from Australasian antitrust regulators to buy Wesfarmers' WFI and Lumley Insurance brands.
Full-year forecasts didn't assume a contribution from Wesfarmers acquisitions, but "it remains the group's expectation that the related transaction will be completed in the second quarter of calendar 2014, subject to regulatory approvals."
IAG expects that GWP will grow at a slower pace in the second-half due to increased competition, although underlying profit will remain steady due to the integration of AMI and stronger earnings generated from significant premium increases over the previous years.
The insurer said it had settled 51 percent of all Canterbury earthquakes claims, worth more than NZ$2.7 billion in the first-half, up from NZ$2.2 billion for the same period a year earlier. Finalisation of commercial claims was close to 80 percent settled. Of residential claims, 70 percent were either underway or settled.
Total reported expenses in IAG's New Zealand business rose 32 percent to A$229 million in the first-half, in part amplified by the high value of the kiwi against the Australian dollar. Reinsurance expenses were up 24 percent to $140 million, reflecting higher cover costs since the Canterbury earthquakes and increased regulatory requirements.
The Australian parent saw a 7 percent decline in first half earnings, dropping to A$758 million, with its insurance margin at 17.5 percent from 19.9 percent a year earlier. The margin reflects net natural peril claim costs of A$335 million, A$200 million higher than the 2013 comparable period owing to New South Wales bushfires and hail storms and Queensland floods.