Nat. Ins. confirms policy intentions

Press, 5 December 1981, Page 20

Nat. Ins. confirms policy intentions

The National Insurance Company of New Zealand, Ltd, remained committed to its earlier decision not to seek to maintain its share of the (Australian) market at the expense of profitability, said the chairman. Mr P. W. Fels. in the annual report. The insurance position in Australia had not changed since last year. Major insurers which reported heavy underwriting losses continued to provide insurance cover at less than the cost of that cover. It was generally recognised that rates were too low, and although some firming in domestic and small business rates was apparent in recent months, it did not appear likely that adequate rating levels would be attained in the short term, he said. National Insurance had adjusted a number of rating levels in the past year. Unlike Australia, the New Zealand insurance industry had been hit by weather claims in the past year. The bulk of these losses had fallen on' the domestic market, and it was hoped that the increasing frequency of these disasters was not a pointer to a future norm, Mr Fels said. “The underlying problem in the New Zealand market is similar to Australia in that the market is over-serviced

with too much capacity and with cover being sold at less than the cost. “The size of the New Zealand market, which is currently growing at less than the rate of inflation, indicates that the reduction in recent years in the number of significant direct underwriters operating in the market is likely to continue," he said. National Insurance intended to continue to stand aside from participating in large insurance accounts where they are obviously underrated. In other areas in which the group worked, such as the Pacific Islands, the outlook was more encouraging, and the international reinsurance section expanded further in what was seen as having long-term potential for growth. A return to underwriting profits in the primary markets of Australia and New Zealand was difficult to achieve in the short-term, Mr Fels said. Premium investment and growth in the new financial year was encouraging so far. “Realised investment gains to date are higher than at this time last year, but with the present uncertainty in the sharemarkets in which we operate, total realised gains for the year may well be less than last year.”

The further decline in the New Zealand dollar against Australian and other major currencies would have a beneficial effect on profits earned outside New Zealand, Mr Fels said. As reported, the group net profit more man doubled in the year to August 31. from $3,630,000 to $8,801,000. Net premiums written rose 24 per cent to $85.3 million, and after allowing for claims, expenses, commissions. and taxation there was an underwriting loss of $5,517,000, compared with $7,193,000 previously. Investment income increased 16 per cent to $11.6M, leaving a trading profit of $6,130,000, compared with $2,859,000 previously. The final profit was after providing $236,000 more for depreciation at $938,000, and the company is exempt from providing a tax figure. A recommended final dividend of 13.5 c a share increases the annual rate from 17c to 20c a share (40 per cent). The dividend requirement is $3,250,000, and it is covered 2.7 times by the profit. Shareholders’ funds rose $4,845,000 to $35,763,000. including steady ordinary capital of SB.IM. Working capital rose $569,000 to $19,730,000, and the current ratio fell from 1.9 to 1.8 to one..