Iag Weighs Cost Impact Of Latest Nz Tremors : News Australia

Iag Weighs Cost Impact Of Latest Nz Tremors : News Australia
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Iag Weighs Cost Impact Of Latest Nz Tremors
Danny John

Insurance Australia Group said today it is “far too early” to assess the cost of the latest earth tremors to hit New Zealand’s disaster-stricken city of Christchurch.

However, the domestic general insurer is expecting to see a further tranche of claims following the devastating earthquakes, which shook Christchurch in September last year and February this year.
IAG shares opened lower, dropping as much as 3 cents, or 0.8 per cent, to $3.53, in line with a broadbased decline for the overall market.
Iag Weighs Cost Impact Of Latest Nz Tremors
n a detailed update to investors this morning, IAG – which with Suncorp dominates the local household and motor insurance industry – indicated that its natural peril claim costs for the current financial year are likely to be higher than its previously forecast figure of $540 million.

The company said prior to yesterday’s large aftershocks near Christchurch it was on target to deliver an insurance pre-tax profit margin of between 8 to 10 per cent.

Assessments of the impact of the latest natural disaster on its full-year results will now be undertaken and the stock market would be updated as soon as possible, chief executive Mike Wilkins said. IAG is due to release its 2011 profit figures in late August.

The group also indicated that its re-insurance costs – the cover it takes out to put a cap on its claim costs – are expected to rise in the coming year as the re-insurers seek to recover the large bills that have come in since the natural disasters in Australia, New Zealand and Japan.

This increase, in turn, will result in higher premium costs for householders and car owners as the bills are passed on. The company is expecting that its reinsurance bill this year will come in at $630 million.

Before yesterday’s aftershocks in Christchurch, IAG said it had seen a “strong underlying performance” from its Australia and New Zealand businesses.  It is currently anticipating growth in its gross written premium – revenue – of between 3 and 5 per cent.

Its forthcoming results are built on the premise that the company’s reserve releases will be no greater than the $228 million recorded in the 2010 financial year. However it said today there was scope for higher releases from “long tail” insurance classes – which cover such areas as workers compensation and motor liabilities – as a consequence of lower costs.

In the meantime, its previously poorly-performing UK business is beginning to show signs of turning around although it will make another loss in the second half of this year – the six months to June 30.  The group is hoping the division will break even sometime in the 2012 financial year.

Asia push
IAG, meanwhile, will aim to accelerate growth in the local region, with a target of getting 10 per cent of the company’s gross written premium from Asia by 2016.
‘‘Our focus is to accelerate growth in Australia and New Zealand and to boost our Asian footprint,’’ Mr Wilkins told the investor briefing.
The company had reset its strategic priorities, with an emphasis on accelerating growth in Australia, New Zealand and Asia, he said.
Mr Wilkins said the company intended to expand its Asian business in existing markets of Malaysia, Thailand and India and in the target markets of China, Vietnam and Indonesia.
IAG aimed to return its UK business to profitability, and the company expected that business to move towards breakeven in 2011/12.

Source : smh.com.au

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