Besieged insurer IAG happy with NZ performance, potential

BUSINESSDESK: Insurance Australia Group, the company besieged by angry clients in Christchurch, has told shareholders it is happy with its strong operating performance, which will improve further in New Zealand.

IAG has fronted angry mobs in the city as residents, particularly those on unstable land after the earthquakes, have vented frustrations at the slowness of claims payments.

Some clients have been caught between the Earthquake Commission, which pays out the first $100,000 of earthquake claims and private insurance companies. IAG owns the NZI, State and AMI brands, giving it 55%  of the home and contents market and 60% of the motor insurance market in New Zealand.

Chief Executive Mike Wilkins told the annual meeting in Sydney yesterday that a highlight of the 2012 financial year was a significant increase in profitability in New Zealand and the momentum was expected to continue in 2013.

The company achieved an insurance margin of 10.4% in its New Zealand business in its 2012 financial year, up from 0.4% the previous year. It increased gross written premiums by 26.6% and expects further growth in 2013.

Further synergies from the integration of the AMI business are expected to improve earnings in 2013. It has previously said that AMI will generate at least $NZ30 million per annum in net synergies within two years.

A shareholder asked why the company had paid $A296 million for AMI when it had $A60m of net identifiable assets. The rest was "intangible and hot air".

He was told that AMI was a very, very good brand and the business would generate substantial value in terms of savings in the New Zealand market.

AMI brought half a million new customers to the company and its business was complementary to the existing State Insurance business IAG had in New Zealand.

Mr Wilkins told shareholders the company was pleased at how its business had met the needs of earthquake-affected customers in Christchurch and there had been sound progress in dealing with these claims.

It was a difficult situation in the city but at June 30 the company had paid $1.3 billion in claims.