Insurer still counting Christchurch quake impact

Transcript

TICKY FULLERTON, PRESENTER: Insurer IAG issued its latest market guidance today, but that's already been overtaken by events.

IAG says it's too soon to determine the business impact of the latest Christchurch earthquake.

But there is one certainty: rising insurance premiums. 

Phillip Lasker reports.

PHILLIP LASKER, REPORTER: As the ground shifted in Christchurch yet again, so will the ground of insurer IAG.

MIKE WILKINS, CEO, IAG: Had the event of 24 hours ago not occurred we were on track to deliver an insurance margin in our previously stated 8 per cent to 10 per cent range. 

Until we've got a better picture of Christchurch that's the best indication that we've got, but we have committed to come back to the market immediately we're able to do so, to update it.

PHILLIP LASKER: It's likely IAG chief, Mike Wilkins, will be back for an update. But in the meantime it's onwards and upwards for businesses in Australia, New Zealand and Asia. Particularly China, where IAG says it's close to a joint venture deal with a regional player.

MIKE WILKINS: The priority for us is now to step up the initiatives to drive profitable organic growth in these businesses, while remaining open to any acquisition opportunities that may present themselves.

PHILLIP LASKER: Then there's the struggling United Kingdom car insurance business, which the IAG boss wanted to keep against the better judgment of some investors. That won't break even until at least next financial year.

The natural disasters and rising reinsurance costs now and in the future, of at least $600 million, means one thing for domestic consumers.

MIKE WILKINS: We do believe that premiums are going to increase. At the moment across our portfolios, when you look in total, we see increases in the range of five per cent to 10 per cent, however, that will be more skewed towards the property classes of insurance rather than motor and other classes.

PHILLIP LASKER: Rising insurance costs is one reason consumers are finding it harder to make ends meet and reluctant to spend, which is reflected in the latest National Australia Bank Business Conditions Survey showing conditions continue to deteriorate in May.

ROB BROOKER, NATIONAL AUSTRALIA BANK: Much of the domestic economy still looks pretty soft to us. The survey's indicated a lot of softness for manufacturing, retail, wholesale, parts of transport as well.

PHILLIP LASKER: RBA (Reserve Bank of Australia) governor, Glenn Stevens, is due to deliver his view tomorrow.