KEY POINTS:
Ausralasian general insurer Promina Group's record annual profit reported today included an "outstanding" result from its financial services business in New Zealand.
The company's net profit after tax for the 2006 calendar year rose 7.9 per cent to A$545 million ($619.3 million), representing a return on equity of 22.7 per cent, an increase of 2.4 percentage points on 2005.
Sydney-based Promina, which is the target of an A$8 billion merger proposal by Suncorp-Metway Ltd, said competition in the general insurance market was intense and that claims conditions remained difficult.
Within the overall result, the financial services business in New Zealand delivered an outstanding result, with a 32.4 per cent increase in net profit to A$45 million, the company said today.
During 2006, the division started a joint venture in this country with the Automobile Association called AA Life Services.
That provided the business with a strong brand presence in the direct market channel and had supported sales momentum in New Zealand.
Promina managing director and chief executive officer Mike Wilkins said Promina's strategy of specialisation and focus had helped it overcome challenges, including snow storms in the South Island which cost A$9m.
Overall Promina's gross written premium grew 6.1 per cent to A$3.49 billion, but for the intermediated general insurance division it was barely changed at A$1.5 billion.
In that division increases in speciality lines and consumer products were offset by generally competitive market conditions and pressure on rates in Australia and New Zealand, Mr Wilkins said.
The company said that in both countries an increased frequency of larger house fires and increases in building repair costs had seen significant pricing increases in selected segments of its home portfolio.
Investment income on technical reserves in the general insurance division for New Zealand operations grew A$5m for the year to A$22m.
In the financial services division, life risk new business sales grew by 27.1 per cent in NZ dollar terms -- 16.5 per cent in Australian dollars -- reflecting a range of strategic initiatives, Promina said.
In the intermediated general insurance division, the New Zealand portfolio was affected by A$5m of unusually large commercial marine and commercial fire claims.
The New Zealand market had experienced growth in premiums through the year in what had been a competitive market with reduced rates reported in some commercial lines, such as fire, motor and marine.
The financial services division also faced a competitive market in this country, Promina said.
In 2006, Promina had pursued a greater presence in the New Zealand broker market and direct markets.
Significant changes in regulation, taxation and the introduction of the KiwiSaver scheme were expected to create future growth opportunities.
The New Zealand life risk business continued to turn around, with an operating margin after tax up 31.6 per cent -- 41 per cent in NZ dollar terms -- to A$25m.
New business sales increased 27.1 per cent in NZ dollar terms -- 16.5 per cent in Australian dollar terms -- to A$9m.
The New Zealand wealth management business delivered a 30 per cent increase in net profit to A$13m, underpinned partly by New Zealand Guardian Trust's market leading position.
- NZPA
