Insurance Australia Group's full-year earnings in New Zealand almost doubled despite cyclones earlier this year pushing natural peril claims beyond expectations for a second year running.
Insurance profit in New Zealand rose to A$218 million ($240m) in the year ended June 30, from A$125m a year earlier, the Sydney-based company said in a statement.
IAG is this country's biggest general insurer, with about 44 per cent of the market. Its New Zealand brands include AMI, State, NZI and Lumley Insurance.
Growth in gross written premiums remained strong at almost 9 per cent to $2.69 billion, or 6.3 per cent to A$2.49b.
But commission, claims and underwriting expenses also improved, with net claims falling to A$975m, down 15 per cent on the year earlier which had included the Kaikoura earthquake.
IAG said that it had benefited from relatively subdued activity in the first-half. But a series of "significant" weather events – including ex-tropical cyclones Fehi and Gita in January and February, and the April storm in Auckland – pushed total peril-related losses for the second-half to A$83m.
That was more than four-times the first-half figure and took the full-year total to A$100m – against an allowance of A$79m. That was still down from A$182m a year earlier.
IAG noted that exceeding the claims allowance by A$21m had trimmed the insurance margins of the New Zealand business by 1.3 per cent.
Despite that, the division's insurance margin for the year climbed to 13.6 per cent, from 7.6 per cent a year earlier. The reported loss ratio also fell to 61.7 per cent from 69.2 per cent including an A$14m foreign exchange benefit from reinsurance recoveries connected with the 2011 Canterbury quakes.
IAG's consumer arm accounted for 58 per cent of the premiums the group wrote in New Zealand in the past year. Its GWP increased 8 per cent due to both rate increases and increased volumes. The AMI private motor portfolio led that growth. IAG said the business division achieved 10.2 per cent GWP growth in the past year, reflecting improving rates, particularly for property and vehicles.
As at June 30, IAG said more than 93 per cent of all claims from the 2016 Kaikoura quake had been settled, including more than 83 per cent of the commercial claims. At the same date, more than $6.7b of claims from the Canterbury quakes had been settled – more than 98 per cent by number.
New Zealand contributed 21 per cent of IAG's group GWP of A$11.65b – 1.8 per cent more than a year earlier.
Group net profit rose 1 per cent to A$947m – excluding A$24m of losses from businesses in Thailand, Vietnam and Indonesia IAG has agreed to sell. Higher taxes and reduced investment income meant profit was barely changed despite improved insurance profits and margins.
IAG shares fell 6 per cent to A$7.71 on the ASX early this afternoon.
The firm is expecting a profit of at least A$200m on the asset sales and today announced a plan to return about A$592m of surplus capital to investors. The plan, subject to shareholder approval in November, is expected to return about 25 Australian cents a share.
That is in addition to the 20 Australian cents final dividend the firm will pay on September 27.