Economic Performance
Dollars and sense
IAG’s role is to provide the best-quality cover to protect livelihoods, workplaces and homes. Our challenge is to balance affordable insurance today with the real costs of insurance over time. This is fundamental for the long-term sustainability of our business and ongoing protection of our communities.
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Our economy was characterised by spiralling building costs, steep increases in wages, and labour shortages in professional services and trades.
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A challenging year
In years when there are no natural disasters our short-term financial performance is substantially improved. But this year we suffered a high number of natural disasters and unforeseen events in a challenging market.
Our economy was characterised by spiralling building costs, steep increases in wages, and labour shortages in professional services and trades.
We were operating in a marketplace where intense competition in recent years has put commercial property premiums below sustainable levels.
We witnessed an abnormally high number of large fires in cool stores and warehouses, as well as in homes. And, our customers were severely affected by floods, tornadoes, frosts, storms and an earthquake.
It was a year in which we discovered the real cost of these disasters and how rising costs are affecting us all.
A need to act
Between July 2007 and June 2008 we paid $704 million in claims, a jump from $608 million in the previous year. We recorded an insurance loss of $20 million. This is a disappointing result but also one we expected and which demands action.
- We recognised the need to responsibly increase our premiums to more accurately reflect the real cost of insurance. We need to offer insurance premiums that are cost effective, yet also reflect the true cost of the risk.
- Last year we committed to reducing the costs associated with running our business. We achieved a 6% reduction which helps ensure we continue to put as much premium income as possible to paying claims.
- Because we know that increased frequency and severity of weather events will continue to impact our business over time, we continued to work hard to reduce our impact on the environment and focus on adapting to the effects of climate change.
These actions will help us to return to profitability and ensure that we continue to provide New Zealanders with the insurance protection they need.
Confidence going forward
Despite the challenges and disappointments of this past year, we’re confident that the actions we’re taking will improve our bottom-line performance in the next financial year for the benefit of us all.
Our contribution to New Zealand’s economy
IAG is the largest fire and general insurer in New Zealand with a market share of 35%. Last year our customers paid us more than $1 billion to protect what’s important to them and we paid $704 million in claims – nearly $2 million every day.
We are regularly rated by Standard & Poor’s, the world’s foremost provider of independent credit ratings. We have an AA- stable credit rating, which means we have ‘very strong’ claims-paying ability.
IAG contributes to the economy in many different ways. We employ more than 2,000 staff throughout the country. We’re a major purchaser of goods and services, supporting hundreds of other businesses in New Zealand, including panel beaters, builders and retailers.
We invest in our community by supporting non-profit organisations like the Sustainable Business Network and Paralympics New Zealand. Last year we made community contributions of $700,000. We also sponsor the major domestic cricket competitions in New Zealand and the Wellington Rugby Sevens. And we help to enhance trade skills through our panel repair and building apprenticeship schemes.
IAG invest in Generation Investment Management, a sustainable fund dedicated to investing in equities with good social and environmental responsibility as well as good corporate governance.
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