Extreme weather claims hit insurance giant IAG's bottom line

Friday, 12 August 2022

As well as selling insurance under the State, AMI and NZI brands, IAG also sells insurance though ASB, Westpac, Bank of New Zealand, and Cooperative Bank.

Australian insurance group IAG, which owns State, NZI and AMI in New Zealand, has announced a profit of A$347million (NZ$384m).

The profit for the 12 months to the end of June, was a huge turnaround after IAG recorded a loss of A$448m in the previous financial year.

Last year’s loss was the result of its Australian businesses facing high Covid-related business interruption insurance claims, as well as having to set large amounts of money aside to make refunds to wronged customers, and fix historic payroll failures.

IAG’s managing director Nick Hawkins said premium increases for policyholder has offset inflationary pressures contributing to an increase in premiums collected from policyholders in Australia and New Zealand.

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But, higher claims for natural perils, including storms, had depressed IAG’s insurance margins.

Premiums collected increased by 7% in New Zealand, with the growth mostly driven by premium increases for policyholders, investors were told.

But the insurance profit from its New Zealand operations fell from A$305m to A$220m as a result of higher extreme weather claims.

IAG operations in New Zealand collected $3.19 billion in premiums, with growth strong in premiums charged to businesses as commercial property values rose, prompting owners to lift the sum insured on their properties.

IAG is a major insurer of infrastructure and residential property developments in New Zealand, and both sectors had seen a strong pipeline of projects.

IAG has been pushing for cost-savings through a simplification and automation project in New Zealand.

The use of “robotics” in State and AMI had cut down the time it took process motor cover claims, and assign repairers, it said.

But staffing costs rose as IAG repatriated jobs from overseas, and increased wages for frontline teams to bring it into line with the wages paid by other companies.

Its target markets for growth in New Zealand included landlord insurance, young drivers and small and medium-sized businesses, IAG told investors.

It also planned “targeted” price reviews on policies.

IAG also sells insurance though ASB, Westpac, Bank of New Zealand, and Co-operative Bank.