IAG has announced that the 13 June earthquakes and aftershocks affecting New Zealand’s Christchurch have caused an expected maximum associated net claim cost of $65 million. This figure is based on its early assessment of the damage caused.
The cost is to be included in the Group’s financial results for the year ending 30 June 2011 (FY11), and is after allowance for a $50 million recovery under the Group’s aggregate reinsurance cover.
Despite the financial impact of the latest Christchurch earthquake, IAG’s Managing Director and CEO Mike Wilkins confirmed the Group still expects to report an FY11 insurance margin in the range of 8-10 per cent This is in line with the guidance provided on 23 February 2011, and reflects:
an increased estimated net natural peril claim cost of around $600 million, including the latest earthquakes in Christchurch; offset by
a higher contribution from prior period reserve releases, which are now expected to exceed the $228 million reported in FY10. This follows favourable experience in long tail classes (as indicated at IAG’s market briefing on 14 June 2011), although related actuarial valuations will not be finalised until after the financial year end.
Guidance for underlying gross written premium growth for the full year remains unchanged at 3-5 per cent.
Wilkins said: “Our priority is to assist our customers and our people, many of whom were still in the process of rebuilding from past earthquakes. We are working closely with government and industry to ensure we can help people get on with their lives as quickly as possible.”
As at 30 June 2011 the Group’s maximum event retention (MER) for a next event is approximately $165 million. The Group is expected to announce its full year result on 25 August 2011.
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