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The Group’s international operations produced a significant improvement in margins, benefiting from favourable underwriting conditions. NEW ZEALAND OPERATIONS PORTFOLIO MIX |
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FINANCIAL PERFORMANCE |
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Gross written premium Net earned premium Combined ratio Insurance margin |
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In this section:
New Zealand operations
Our customers' perspective
Our community
Looking forward
Asian interests
Looking forward
NEW ZEALAND OPERATIONS
Favourable underwriting conditions, coupled with further operational efficiencies and high customer retention and satisfaction levels, enabled our New Zealand operations to maintain momentum during the year. This resulted in an improved insurance margin and combined ratio.
Our people were put to the test again this year responding to some of the worst weather-related events in New Zealand’s history. In May 2005, in the upper North Island, major damage caused by storm-related floods and landslips resulted in more than 1,500 claims. A month earlier, the most severe hailstorm in Christchurch in 10 years led to approximately 3,100 claims.
Claims costs from major weather-related events totalled around $36 million, with the scale of claims and rebuilding placing strain on resources in affected areas. This compared to around $14 million in the prior year, net of reinsurance recoveries.
Despite the challenge of responding to these events, as well as operating in an environment experiencing heightened competition from both domestic and offshore competitors, we maintained our position as New Zealand’s market leader during the year, holding a share of approximately 37% of the general insurance market (according to Insurance Council of NZ Statistics).
This was achieved through a clear focus on leveraging our product and distribution capabilities and improving customer service and delivery standards. We also further increased the efficiency of our operations, while our bottom line benefited from the first full year’s contribution of the integration synergies flowing through from the acquisition of NZI in January 2003.
Our distribution network was enhanced during the year through the acquisition of interests in three small, niche underwriting operations:
In addition, our New Zealand operations launched a number of core business products, including insurance products tailored to high net worth individuals, body corporates and students.
We also reviewed our technology systems which manage customer claims and policies, and resolved to adopt the same platform in New Zealand for our direct lines as used by IAG’s Australian personal lines operations, rather than build a stand-alone platform.
Our people have been integral to achieving our consistent results. The most recent survey of our 1,900 employees showed an improvement in engagement levels, which is particularly pleasing given the operational challenges we faced during the year. Career and capability programmes and improved training, coupled with our system of reward and recognition and strengthened leadership from the management team, contributed to the improvement.
OUR CUSTOMERS’ PERSPECTIVE
Recognising that responsiveness to customers is a key to our sustainability as a business, we made further progress during the year in improving our service delivery.
To drive improvements, we reviewed our internal training programmes, success measures and key performance indicators, and introduced initiatives to heighten our service standards, including the ‘Customer Promises’ concept and a customer feedback system.
A ‘Customer Promise’ is a statement developed by our customer-facing teams that helps to heighten our people’s motivation to improve every customer interaction, while the feedback system is a formalised method to capture and learn from our customers’ comments.
Customer satisfaction results demonstrate the success of the improvements we have made. In our direct channel under the State brand, overall customer satisfaction increased from 86% to 89%.
Similarly, research conducted among key brokers to measure the strength of their relationship with NZI showed the business achieved significant increases in broker satisfaction, improving from 70% to 84%.
OUR COMMUNITY
We take our role in promoting safer communities in New Zealand very seriously.
We were very pleased that this was recognised when IAG New Zealand took first place in the large business category of the Sustainable Business Network’s National Sustainable Business Awards. The award recognises our focus on tackling key community issues such as under and noninsurance, climate change and flood mitigation.
A range of programmes have been launched through our partnership with the New Zealand Fire Service, most notably our sponsorship of the Fire Awareness Intervention Programme which aims to overcome the problem of children and adolescents lighting fires.
Our Neighbourhood Support and Community Patrols work in close partnership with the police to make people’s homes, streets, neighbourhoods and communities safer places to live and work. Our sponsorship of Victim Support assists in providing practical advice, information and emotional support to more than 140,000 New Zealanders affected by trauma every year.
In line with our commitment to ensuring the sustainability of our key suppliers, we continued to support the vehicle repair industry through our apprenticeship scheme. Under the scheme, which is in its third year, IAG New Zealand pays all fees and course-related costs for selected students to complete a National Certificate-level qualification in panel beating or vehicle refinishing. During the year, 25 applicants were selected to complete the three year course.
Our commitment to reducing our impact on the environment progressed well during the year. Initiatives included new recycling programmes in our offices, the introduction of environmentally friendlier vehicles in our fleet, the inclusion of sustainability criteria within the design and fit-out of our new building in Christchurch and the introduction of new sustainability criteria to guide the selection of all our suppliers.
LOOKING FORWARD
We will continue to focus on growing our New Zealand operations through innovating and developing our capabilities, reducing costs and leveraging our scale.
We will also focus on developing niche business opportunities, like those offered through our marine and travel insurance ventures.
We recognise that we have an ability to influence and shape our business environment by extending our leadership position within the community, particularly in public education about the issue of under insurance and noninsurance.
As our customers continue to increase their level of understanding about insurance products, we will be required to constantly meet the challenge of updating our technology and operational processes. Our recruitment and employee engagement strategies will need to evolve to match the challenges of a tightening labour market.
ASIAN INTERESTS
The Group continued to develop and expand its portfolio of assets in Asia.
In China, our key strategies to develop our wholly-owned road side assistance company, the China Automobile Association (CAA), are to develop a retail direct distribution strategy and to expand the business beyond Beijing to become a national player in the road side assistance market.
CAA recently broadened its product mix from only offering pre-paid membership to offering a range of fee-for-service options for road service and towing.
In addition, CAA broadened its distribution, acting as an agent selling car insurance for China’s three leading insurers.
CAA is also developing its position as a road safety advocate, establishing an accredited partnership with Tsinghua University for a smash testing facility. We have commenced free towing services for government-owned buses in cooperation with the Beijing Traffic Management Bureau to alleviate traffic problems, and we are also assisting the government with the Beijing 2008 Olympics.
In Thailand, we acquired a small general insurer, formerly part of the Royal & SunAlliance Insurance Group in July 2005. This acquisition, coupled with our existing strategic 22% holding in Thailand’s fifth largest motor insurer, Safety Insurance, positions the Group well to play a role in the inevitable consolidation of the fast growing Thai general insurance market.
With our technical assistance, Safety Insurance has continued to grow profitably. During the past year, Safety Insurance’s revenue grew more than 10% and earnings per share increased by about 20%.
LOOKING FORWARD
Our strategy remains to build a portfolio of insurance assets in Asia, subject to finding the appropriate opportunities at the right price.
Working with CAA is assisting us in gaining knowledge of the general insurance market in China, which is benefiting our research of potential partnership opportunities.
In the growing Thai general insurance industry, we are positioned well to play a role in the market’s anticipated consolidation.
Our focus for future growth opportunities in Asia remains on China, Thailand, Malaysia, Hong Kong, Singapore and India. We intend to open a regional office in Singapore to assist with the management and growth of our Asian investments.
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