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IAG NZ profit rises but feels quake impact

NZN 22/02/2017 Sophie Boot

Insurance Australia Group's New Zealand division boosted first-half earnings although the local business is still wearing the impact of pricier reinsurance, with the Kaikoura earthquakes costing it $117 million.

Sydney-based IAG's New Zealand business is the biggest general insurer in the country, with the AMI, State, NZI and Lumley Insurance brands on this side of the Tasman. The local division reported an insurance profit of A$36m in the six months ended December 31, up from A$11m a year earlier but down from A$193m in 2015.

Gross written premiums rose 5.4 per cent to A$1.1b, and reinsurance expenses fell to A$311m from A$340m, although still higher than A$143m in the first half of 2015. The local division had a reported insurance margin of 4.3 per cent, from 1.4 per cent in 2016, while its underlying margin was 15.3 per cent, from 18.4 per cent a year earlier.

Last year the New Zealand unit's insurance profit was hit by a NZ$150m increase to its risk margin from the February 2011 Canterbury earthquake event.

The insurer has completed 96.5 per cent of its claims from Christchurch, valued at $6.1b, it said. Many of the remaining claims are complex or subject to litigation, and it expects them to take several years to finalise.

The Kaikoura earthquakes in November 2016 produced a net claim cost after reinsurance of $117m, with any subsequent developments covered by its 2016 catastrophe reinsurance.

IAG said the New Zealand division is expected to remain competitive in the second half, and it will focus on appropriately pricing risk "with added emphasis following the recent Kaikoura earthquake", while underlying profitability is expected to remain strong.

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