The country’s largest insurer IAG has posted an after-tax profit of A$832million , up 138% on the previous year thanks in part to large increases in premiums on house, contents and car policies.
The Australian ASX sharemarket-listed insurer owns insurance businesses in Australia, as well as owning the State, NZI and AMI brands in New Zealand, where it is the biggest insurer ahead of Suncorp and Tower.
IAG’s increased profit for the financial year to the end of June was up from A$347m (NZ$375m) in its previous financial year, however, its New Zealand operations saw profits fall as a result of claims for damage caused in the Auckland Anniversary weekend flooding in January, and Cyclone Gabrielle in February.
The flood and cyclone were the second and third-largest insurance events in New Zealand history after the Canterbury earthquakes.
IAG New Zealand’s insurance profit was A$44m for the year to the end of June, compared to A$220m the previous year.
Nick Hawkins, managing director and chief executive of the IAG group, said premiums collected from policyholders in Australia and New Zealand a increased by 10.6%.
In New Zealand, the premiums collected rose by about 12% to just under $3.6 billion.
IAG’s underlying insurance margin across its entire Australian and New Zealand businesses fell, however.
Hawkins said the past financial year was another with “significant perils”.
“We saw the devastating impacts of multiple large-scale events across Australia and New Zealand on our customers and communities.”
Policyholders made about 50,000 claims for damage caused in the Auckland Anniversary weekend flooding, and Cyclone Gabrielle.
The big profit jump for the period was partly the result of releasing money the company had set aside in Australia to settle business interruption insurance claims from Australian weather events.
But warmer and dryer conditions should reduce flooding claim, Hawkins said.
The IAG profit announcement follows that of Suncorp on August 9.
Suncorp, which owns Vero and has a majority-stake in AA Insurance, saw the profit on its New Zealand operations drop 30% as a result of the impact of extreme weather events.
Home and car owners saw their insurance costs rise sharply during the year as IAG increased premiums to cover increasing claims costs.
In June, IAG said it had been increasing premiums by about 20% on car insurance and about 20% to 30% on house insurance.
House, contents and car insurance policies are annually-renewable meaning insurers can increase premiums each year.
However, it is not only the premiums insurers collect that have increased.
Toku Tū Ake EQC raised levies on policies, and the government also collects GST and a levy on each policy to fund Fire and Emergency.
Recent years have been tough for IAG shareholders, including many KiwiSaver funds.
Three years ago, IAG’s shares were trading on the ASX at just over A$8.45. On Friday, they were worth A$5.84.