The loss was $3.3 million and was directly due to the $18m in extra costs incurred from the Kaikoura quake, which affected other parts of the upper South Island and lower North Island.
At balance date FMG had settled 40% of the 3300 earthquake claims and was on track to be 75% settled at the one-year anniversary of the quake in mid-November, chief executive Chris Black said.
Many of the claims involved Earthquake Commission cover, which FMG and other companies were now managing in a new operating model for the industry.
He expected the quake to have a total insurance cost of $100m for the FMG business, most of which was covered by overseas reinsurers. Most of the damage had a “strong rural skew to it”.
The level of non-earthquake claims also increased last year.
The co-operative insurance group also had 800 claims from Cyclones Debbie and Cook, which hit the Edgecumbe area of Bay of Plenty. They were two-thirds settled.
There were also more vehicle claims and claims for house and commercial building fires, all of which were more expensive to repair than previously, Black said.
FMG had increased its premiums after absorbing extra costs over the previous seven years.
Insurance companies were valued on what was called the combined ratio – the comparison of payout and other costs with its premium income. For every $100 received in premiums, FMG paid out $74 to claimants and $34 in other costs during the year.
“That’s $108 for every $100 coming in and it’s not sustainable.”
However, the group was in a strong financial position with capital reserves of $226m at balance date (from $229m a year earlier) and $500m of total reinsurance cover.
Chairman Tony Cleland said the year was very successful though the financial result did not reflect that.
Given the volatile nature of the industry FMG anticipated losses from time-to-time and was set up to handle them, Black said.
“The core concept of insurance is that everyone chips in a bit to help others when they need it and that’s when we step up. It’s what we’re here for.”
FMG had increased its share of the NZ rural insurance market to 46% from 43% the previous year.
That was by far the biggest part of its business and the group could easily manage a bigger share than that, he said.
However, it had also increased its general lifestyle and commercial business over the year and was also growing the personal insurance business at a double-digit percentage rate. It closed the year with 76,613 clients, a 4305 year-on-year increase.
Before the latest year, the group’s previous loss was in the 2009 year, after the global financial crisis and a significant rise in the number of house fires.
For the latest year the total payout covering all claims was $152m, up $15m on the previous year.
At year-end the group had an A (excellent) credit rating and had 2.25 times the minimum capital required by the Reserve Bank.
Black said there were many advantages in insurance companies managing claims for the EQC as was happening with the Kaikoura situation.
“It’s working well and means policy-holders are just having to deal with one insurer.”
