Nat. Ins. predicts $8M profit

Press, 2 May 1981, Page 21

Nat. Ins. predicts $8M profit

The directors of National Insurance Company. Ltd. in a detailed and confident interim report, refer positively to a resumption of the company’s excellent track record of recent years, and predict a net profit of more than SBM for the full year to August 31. The company, which suffered severe profit cuts last year, is now aiming to increase its annual dividend rate to about 20c a share (40 per cent) for the year. The profit prediction compares with last year's $3,630,000 profit, and the previous record of $5,902,000 in 1979. It would represent earnings of 50c a share on capital (100 per cent), and thus give scope for a further increase in dividend, the directors say. The directors say that they plan to maintain their policy of passing on the benefits to shareholders. This policy in recent years has seen a string of bonus issues and successive dividend rate increases. A 40 per cent payment this year would require a distribution of $3.24 million against $760,000 when National started to take off in 1976. Last year’s payout was 17c (34 per cent). As reported. National made a strong recovery in the six months to February

28 with net profit $3,762,000 against $1,790,000 in the previous corresponding period. The underwriting loss was reduced from $2,140,000 tc $1,201,000 whil the company again performed very strongly on the investment side with investment income up from $2,891,000 tc $3,675,000. The result alsc included realised capital gains of $1.288.00C ($1,035,000). Once again, the company has taken a conservative stance on claims in the difficult Australian market with directors noting that reserves remain higher than the industry average. In spite of this the’underwriting loss for the half was significantly below that for the previous corresponding period. The Australian operations in particular are now running at a better level and directors are confident of a better than market average result there. Elsewhere, new acquisitions proved profitable. Amd while underwriting losses seem likely to continue — even if on a diminishing scale — the prospects are good from premium growth, a buoyant investment income and continuing gains on investment realisations. "The 52 per cent increase in gross premiums was very

heartening and we anticipate another significant increase in the second half," directors said, "An important part of the increase came from higher premium rates in Australia and we are hopeful of maintaining this higher rating level in the future. Future tax benefits carried forward from last year, have not been brought into the results for the period." Investment income increased 27 per cent over the first half of last year. Advantage was taken of the buoyant markets, particularly in Australia, to realise further investment gains in the period. After these realisations, the excess of the market value of the share portfolio over book value is about $l5 million, compared with the end of the last financial year’s $lO million. Further investment gains are expected to be realised in the second half. The continued weakness if the New Zealand dollar, in conjunction with excellent investment conditions in Australia, will ensure further growth of investment income during the second half. This situation should also ensure continued exchange gains because most assets are overseas, but it should be noted that non-operating exchange gains recorded this

year have not been brought into the first half result: As reported the company is to purchase from June 30 the General Insurance portfolio of the CBA bank subsidiary. AFG Insurances Ltd. This will add 20 per cent to National’s Australian portfolio and take it into the top 10 of the non-life. non-Gov-ernment insurers in Australia. The New Zealand portfolio of Cornhill Insurance has also been taken over, adding a further 7.5 per cent to National’s portfolio.