Bushfires, cyclone set Sth British back $20 million

Press, 16 June 1983, Page 21

Bushfires, cyclone set Sth British back $20 million

Exceptional losses of $2O million, caused mainly by this year’s Australian bush fires and the Fiji cyclone, weakened an improved result from the general insurance division of New Zealand South British Group, Ltd.

In announcing the group’s unaudited annual results, down 28.4 per cent to $29,285,000 to March 31, the chairman, Mr F. R. A. Hellaby, said that the bushfires and the cyclone had a combined net loss of more than SIOM for the division. In addition, there were other severe losses arising from unusual weather patterns and a series of large fire claims. “It is evidence of the financial strength of the group that these losses were absorbed while still maintaining strong reserves at the end of the year,” Mr Hellaby said. The trading loss for the general insurance division of $5,094,000 ($3,922,000 loss previously) comprised and underwriting deficit of $43,107,000 and investment income of $38,013,000. Mr Hellaby said that the directors were confident that the underlying trends in the general insurance division were more positive than this year’s results indicated, after an improved performance in the first nine months of the year.

The benefits of the period of consolidation after the merger of New Zealand Insurance and South British Insurance were reflected by the substantial improvement in the earnings of the general insurance division in the first half of the year.

Now that the bulk of the merger costs had been taken into account, the first

half earnings were considered a better indication of future prospects than the second half earnings which had been badly affected by the extraordinary claims, he said. The earnings of the division were up to expectations, since the balance date. The group had been affected by the depressed business conditions which had existed in all of the territories where the group had traded, but all divisions, except for general insurance, had still returned satisfactory results. Total group revenues increased 14.5 per cent to $641,747,000. The four other trading divisions — life insurance, finance companies, trustee services, and information services — returned good results. The allocation of increased resources to these divisions, to expand the financial services offered by the group, augured well for the future judging by the latest results. At balance date, the market value of group equities and fixed interest securities exceeded book value by $14,607,000, which compared with a deficit of $12,511, previously. Because of the emergence of the financial services and information services industries as one of the fastest growing sectors of the international economy, the decision to allocate more resources to these businesses had proved correct, he said. The finance companies and information services divisions were now ready to capitalise on the substantial potential growth which existed throughout the Pacific region. “Taking these factors into

account, along with the expected improvement in the performance of the general insurance division, the directors look forward to improved results for the group as a whole,” Mr Hellaby said. A breakdown of results by divisions shows that the total contribution from the general insurance division fell 41.7 per cent to $21,503,000, and was arrived at by the inclusion this year of realised gains and exchange fluctuations in this division. The realised gains on sale of assets totalled $15,350,000, down 44.6 per cent, and exchange fluctuations were 14.1 per cent lower at $11,247,000. Life insurance earnings more than doubled from $1,273,000 to $3,141,000, after the inclusion of realised gains on the sale of assets totalling $1,776,000 (nil). Finance company earnings returned a 55.2 per cent higher result at $3,716,000. Trustee services were a marginal 4 per cent up at $398,000, and the information services division showed its first profit of $527,000, compared with a $67,000 loss last year. The latest result was after deducting minority interests, and included the company’s share of equity earnings (no figure given). The profit was also after providing for tax. A final dividend of 3.75 c a share is recommended, giving a steady annual tax-free rate of 7.5 c a share (15 per cent). The dividend is payable after the annual meeting of August 19, and new shares arising from the conversion of New Zealand Insurance Company’s specified preference shares rank for five-sixths of the payment, but participate fully for all future dividends.