NZI lifts its profit almost 60 p.c.

Press, 13 June 1984, Page 29

NZI lifts its profit almost 60 p.c.

NZI Corporation, Ltd, formerly New Zealand South British Group, Ltd, overcame underwriting losses in the year to March 31 to post a 59.4 per cent increase to 546,685,000 in its total group net equity profit The directors also propose a one-for-four bonus issue and recommend a final dividend of 4.75 c a share to increase the annual rate from 7.5 c to 8.5 c a share (17 per cent). Underwriting losses have dogged the company in the last few years, but NZl's general insurance division this year earned income from operations of $19,253,000, compared with an underwriting loss of $5,745,000 previously. The chairman Mr F. R. A. Hellaby says in the preliminary profit announcement that the initiatives taken in the last three years by the

division to improve underwriting returns and consolidate trading are now producing substantial benefits.

“The result for the general insurance division is the more noteworthy for having been achieved in spite of intense competition and nearly static economies in all territories in which the divison works.”

In the division’s largest territories, Australia and New Zealand, strong underwriting controls and a major reduction in operating costs have resulted in a greatly improved underwriting performance.

“In New Zealand the impact of the Southland floods was absorbed by a much improved underwriting result in all classes of business,” Mr Hellaby says. The life insurance, finance companies, trustee services, and information services divisions have also returned excellent results which underline the success of the commitment to pursue faster growth in these divisions to lessen reliance

on General Insurance earnings. This year about 40p.c. of the group’s consolidated net earnings were contributed by these divisions. NZI Finance, Ltd, and NZI Life, Ltd, once more returned record earnings while the NZ Guardian Trust Company, Ltd, and Paxus Information Services Group, Ltd, substantially increased their profit contributions.

The earnings of the life insurance division benefited by an abnormal item of $2,092,000 relating to the additional transfers by the Australian life companies as part of their planned reorganisation and a favourable decision on a New Zealand taxation matter which had been in dispute. The investment services division, which has previously provided investment management services to the other divisions on a cost recovery basis only, is being made an independent section on the same basis as the other divisions and is accordingly included in the

consolidated statement of annual earnings for the first time.

The division will charge a market-based fee for the services provided to other divisions in the group and is also going to offer its worldwide investment expertise to clients outside the group to manage investment portfolios on a service fee basis. Mr Hellaby says. The buoyant investment markets throughout the year have contributed to substantial increases in the value of investments for the whole group. The management of investments and properties has produced realised capital gains of $16,160,000 and the surplus of market value over book value of listed investments held was $76,542,000, an increase of $61,935,000 since the last balance date. “The latest results demonstrate that the group is able to trade profitably in the difficult economic times now prevailing.”

Because of the consolidation of the general insurance division and the con-

tinued rapid growth in other divisions, the group is well placed to withstand any downturn in economic conditions and is seeking a new era of profitable growth and and development under its new name, he says. Group revenue rose 7 per cent to $804.6 million. An analysis of total earnings shows that income from trading was $32,743,000 ($912,000 previously), extraordinary profits from the sale of assets were $16,160,000 ($17,126,000), and exchange losses of $2,218,000 ($11,247,000 profit). Besides the operating income from the general insurance division already mentioned, its final result was up 30 per cent to $28,005,000. The results for the other sections included life insurance — trading income more than doubled from $1,273,000 to $2,595,000 and the final result also more than doubled from S3.IM to $6.5M. Finance companies — trading income up 63.4 per cent to $5,939,000 and the

final result more than doubled from $3.7M to $9.7M. Information services — operating income more than doubled from $527,000 to $1,129,000. and the addition of exchange gains (nil previously) increased the final result to $1,385,000. The tax-free final dividend is payable on August 15, but the bonus shares arising from the proposed issue will not participate in that dividend. However, they will rank equally with the existing ordinary- capital after that payment. The contributing shares receive 2.375 c each, half the final payment, and these shares will cease to be quoted on July 23, and the final instalment on the units is due by August 6.

The entitlements of the option-holders are proportionally increased by the bonus issue, when they exercise their options on either June 30, 1985, or on the same day the following year.

The ex dividend and ex bonus date is July 16.