BUSINESSDESK: Insurance Australia Group's New Zealand subsidiary, the nation's largest general insurer, reports a $A103 million annual profit, reflecting a 27% increase in gross written premiums, and has reiterated a willingness to enter the workplace insurance market if it is deregulated.
The subsidiary of Australia's largest insurance company, which has the State Insurance, AMI and NZI brands, has been the target of protests from disgruntled policyholders in Christchurch, but its results released in Australia shows a healthy revival in earnings.
Profit in the 12 months ended June 30 surged from $A3 million a year earlier and is a turnaround from a $A87 million loss in the second half of the previous year.
New Zealand gross written premiums were $A1.2 billion, a 24% rise in local currency terms.
The insurer is predicting growth in gross written premiums in 2013 from a combination of increased premiums and a full-year contribution of the AMI business it bought.
AMI will be earnings accretive in its first full year of operation, the company says.
Overall, the New Zealand business produced an insurance margin of 10.4% for the full year and 13% in the second half.
Rate increases and the contribution of AMI produced a net earned premium of 40% in the second half of the 2012 financial year.
The AMI integration is well advanced and will produce cost synergies of $30 million in two years, the company says. The government kept the Christchurch earthquake liabilities to facilitate the sale of AMI to IAG after the Christchurch earthquakes.
IAG has 55% of the home contents market in New Zealand and 60% of the motor insurance business.
"Significant rate increases have been implemented to recover substantially higher reinsurance costs," the company says.
IAG New Zealand contributes 13% of the earnings of the Australian parent, which today reported a 17% decline in full-year profit to $A207 million on writedowns of its UK operations.
IAG says it is working with the Earthquake Commission to resolve issues to get solutions for Christchurch residents.
The company acknowledges that customers are finding it more difficult to afford insurance with a trebling of EQC levies and it says it is working on underwriting initiatives to address this.
It reiterates that it is interested in entering the workplace insurance market if the government opens ACC to competition.
If revised schemes to introduce choice to the work account and extending the accredited employers programme facilitated true competition IAG will consider entering the business.
The shares last trade at $A3.84 on the ASX and have jumped 29% in the past six months.