Good year unlikely to repeat says AMI

By CHRIS DANIELS

AMI insurance, the biggest New Zealand- owned fire and general insurer, says future income from its investments may not reach the lofty heights of last year.

The mutual company, owned by policy holders, said yesterday that it made an after-tax profit of $26.6 million for the year to the end of June, up from $19.4 million last year.

The star performer was income from its investments, which grew 41 per cent, to $17.6 million. Of this, $12.5 million came from interest payments and $1.8 million from company dividends.

All net profits are retained by the company, which has now increased its reserves to $196 million.

AMI paid out $142.6 million in claims during the year, which included the big storms and floods in the lower North Island.

Company chairman Kerry Nolan said while income from premiums was up 12 per cent, the huge increase in investment profits might not continue this year.

He said the Australasian equity markets, where AMI concentrated its investments, had been particularly strong.

"The strength of the New Zealand and Australian economies has continued to surprise. Their economic performance has been instrumental in the confidence and the performance of investment markets in this part of the world," Nolan said.

"Australasian equity markets appear fully priced following their performance over the last year, and it is unlikely that they will continue to perform at the recent levels. It is reasonable to expect that interest rates will continue to rise.

"It is likely, therefore, that investment returns will ease back in the year ahead and long-term investment returns are likely to be somewhat more constrained."

Company chief executive John Balmforth said support from reinsurers meant losses from the "disastrous weather events were contained at a manageable level".

Looking ahead, he said there were indications that "the beneficial outcomes of the cyclical nature of the insurance business may have peaked".

Balmforth said the personal insurance sector (AMI does not do commercial business) had become increasingly consolidated, with the top five companies accounting for 75 to 85 per cent of the business.

AMI was marking itself out from the others by its extensive branch networks and call centres, promoting itself not on cheaper prices, but on better service.

Balmforth said the benefits of having "people on the ground" had been proved during the North Island floods earlier this year, with local people able to work well in their own communities, knowing the customers.