N.Z. Ins. Lifts Profit But Sees Difficulties

Press, Volume CX, Issue 32392, 3 September 1970, Page 14

N.Z. Ins. Lifts Profit But Sees Difficulties

(New Zealand Press Association)

AUCKLAND, September 2.

The New Zealand Insurance Company, Ltd, Auckland, lifted net profit by $182,973, or 5.5 per cent, to a record $3,494,539 in the year to May 31.

The result was achieved after total income of the group rose 26.7 per cent to $60.2m, and total expenses jumped 28.2 per cent to $56.7m. Because of changes in balance dates of companies in the group, profits are not able to be compared satisfactorily with those of previous years, the chairman (Mr A. G. Wilson) says in the report

The results of the Victoria Insurance Company, Ltd, Melbourne, which was acquired in 1968 were consolidated; last year this was not done although N.Z.I. received an amount of $182,554 in investment income from the Victoria. Differing balance dates in other group companies have now been brought into line. Commenting on the company's operations during the year, Mr Wilson says that the margin of profit to insurers over a world-wide portfolio is very small considering the liabilities undertaken, and although many premium rates have moved upward the combined effect of natural disasters, increased fire wastage in the major industrialised countries, ever higher awards for personal injuries, the increasing volume of motor traffic, and inflation severely limit the returns on capital employed. A substantial increase in non-life insurance business was achieved. The marked fall in profitability in this area last year has been curbed, despite a large warehouse and retail store fire in Oatnaru where the gross loss exceeded slm.

REVISION OF RATE It is inevitable that further revision of motor vehicle insurance rates will be required, Mr Wilson said, and that there will need to be a greater selection against those whose accident records deserve this. It is clear, that the present premium rates for compulsory third party insurance are inadequate when compared with the increasing awards for damages, he said. In New Zealand, the trust department had a record year, with total new business of $94.7m, Mortgage advances exceed sBm, and. debenture trusteeships exceed slolm. Estate, trust and agency assets administered are greater than sl33m.

Australia is now the largest single area of operations

of the group, and will be of ever increasing importance, Mr Wilson said. Motor insurance activities in Australia, in common with most of the market here show a seriously deteriorating trend, and undoubtedly premiums must be raised in the near future. The cost of claims is consuming between 5 per cent and 7 per cent more of premium Income than that 10 years ago, and profit margins had been seriously eroded. SPREAD OF GROUP

Reorganisation in the United Kingdom produced a better result, and given reasonable stability in the insurance market profitable trading should be maintained. In the last quarter of 1969, there were three super tanker losses in which the company had a share, and fire wastage continued to increase at an alarming rate. Activities in Africa expanded at a very satisfactory rate, although underwriting results were adversely affected by an earthquake and freak hail storm and price levels on the South African stock market declined sharply.

In India the future is threatened by the announced intention to nationalise all nonlife insurance.

The total direct premium income of the group is spread in the following proportions, Australia 40 per cent. New Zealand (25) Asia (17), Africa (6), Europe and the Near East (8), and the Western Hemisphere (4). INVESTMENT INCOME During the year under review, the net surplus from underwriting of the group dropped 6.1 per cent from $841,000 to $790,000, despite an increase in premiums earned of 27.9 per cent from $44.9m to $57.3m.

The growth in investment income of the group rose $230,000 to $2.7m. A considerable proportion of the group’s investments are in Australia, and the change in balance date resulted in only 11 months trading income for the group being included, and only 9 months income from the Victoria Insurance group. The total assets of the group jumped from s7sm to sllsm, and total liabilities increased by $43.4m to sB9m. Shareholders funds fell by s3.lm to $26.2m after s6.lm (being the difference between the net assets of Victoria Insurance and the cost of the shares in that company) had been written off the contingencies reserve.

As previously announced the group increased the dividend rate from 15 pier cent to 16 per cent, requiring $2.1 million.