IAG posts solid results despite quake reserves boost
General insurer Insurance Australia Group (IAG) has said that it has increased its loss reserves in relation to the 2010 and 2011 Canterbury earthquakes by NZ$950 million ($713.6 million).
“These reserves remain within the group’s applicable reinsurance covers. While the group believes it has adopted an appropriate reserving position, given the complexity of the Canterbury earthquake events, there remains a degree of uncertainty as to the ultimate cost,” said IAG.
In December, IAG said that it expected as much as NZ$1 billion more in final claims due to an increase in forecast rebuild costs and a number of adverse court judgments.
The bulk of the increase relates to the quake on February 22, 2011, which IAG anticipates will exceed its NZ$3.25 billion reinsurance coverage but losses from the other quakes are expected to fall within its broader programme.
Despite this, IAG posted a solid set of results for the half year ended December 31, 2014, despite a drop in insurance profits.
Its insurance profits for the half year hit A$693 million, compared with A$758 million in the same period of the prior year.
This equates to a reported insurance margin of 13.4 percent for the half year ended December 31, 2014, compared to 17.5 percent for the same period of the prior year. IAG said the margin was impacted by net natural peril claim costs of $421 million, which exceeded the half year allowance by $71 million, and included $165 million for the November Brisbane storm event.
Its gross written premiums increased by 17.1 percent to A$5.6 billion in the half year, mainly attributable to the addition of the former Wesfarmers business.
Mike Wilkins, IAG managing director and chief executive officer, said: “Our underlying performance has remained strong and we have made significant progress in moving to our new operating model in Australia, and integrating the former Wesfarmers business. This ensures we can efficiently respond to the changing business environment, while also maintaining our strong underwriting discipline.”
