IAG Outlines Strategy to Sustain New Zealand Market Position

Insurance Australia Group Limited (IAG) has issued an update on its New Zealand business, and has outlined its strategy to maintain its position and deliver sustainable strong returns in that market.

At a briefing in Sydney IAG Managing Director and CEO Mike Wilkins said New Zealand remains an attractive market and is of growing importance to the Group, representing 17 percent of the Group’s gross written premium (GWP).

“IAG entered the New Zealand market with the acquisition of State Insurance in 2001, supplemented by the addition of the NZI intermediated business in 2003 and AMI in 2012,” he continued. “As a result, today we are the largest provider of general insurance in the country with an overall market share of nearly 40 percent and a premium base of around NZ$2 billion [US$1.6934 billion].

“In New Zealand we are targeting GWP growth at least in line with the industry and an underlying margin of around 10 percent over the longer term, which represents a strong return on capital given the short-tail nature of the business. We anticipate the underlying margin will be slightly higher in the short to medium term, consistent with the business’ recent performance,” Wilkins said.

IAG’s New Zealand CEO Jacki Johnson, explained that the country’s general insurance industry is mid-way through a significant period of change and that IAG is actively engaging with government on the proposed industry reforms to ensure that New Zealand retains a sound and efficient industry.

“IAG is proactively communicating with our home customers about the New Zealand-wide move to fixed sum insured home policies, from an unspecified replacement basis, in response to the requirements of reinsurers,” Johnson said. “Our need2know education campaign was launched in March 2013 and is attracting significant customer interest, with over 1,000 visits to our website each day.

“In our direct insurance business we have two leading brands, State and AMI, which allow us to offer a wide range of product and pricing options for customers. We continue to target at least NZ$30 million of annual synergies from the integration of the AMI business by April 2014.

“Our intermediated business, NZI, is simplifying the way it does business with its customers and is focused on appropriate price and sustainable risk underwriting. NZI was recently awarded ‘Intermediated Insurance Company of the Year’, a significant achievement given the challenges of the post-earthquake environment.

“We believe we have the appropriate strategies in place to ensure IAG sustains its market-leading position and strong profitability in New Zealand over the longer term,” Johnson said.

Source: Insurance Australia Group