Kiwibank's insurer posts 38% rise in annual profit as push into life insurance gets underway

By Gareth Vaughan

Kiwi Insurance, the sister company that Kiwibank is working through in its life insurance push, posted a 38% rise in profit after tax in its last financial year, albeit off a low base.

Kiwi Insurance's annual report, filed to the Companies Office just before Christmas, shows profit after tax of NZ$1.99 million for the year to June 30, 2012, up NZ$549,023, or 38%, from NZ$1.44 million the previous year.

Kiwibank has been selling the likes of house, contents, motor vehicle and travel cover and health insurance through outsourced providers since it opened for business in 2002. However CEO Paul Brock said last year it was moving to an "in-group manufacturing model" for some insurance products such as credit card repayment insurance and a term life product.

One of Kiwibank's conditions of registration with the Reserve Bank is that the banking group's insurance business isn't greater than 1% of its total consolidated assets. Kiwi Insurance is therefore be a sister company and subsidiary of Kiwi Group Holdings, a holding company of Kiwibank's parent New Zealand Post.

Last August Brock said the NZ Post group's push into life insurance would see it selling insurance through Kiwibank's network that's cheaper than insurance sold by insurance brokers.

"The main thing is that we want to simplify the life insurance product offering and make it very easy to buy so that it's integrated into your discussions with us about your financial needs. Largely it's about a simplified product that's really easy to get and get hold of, and secondly that's really good value," Brock said in August.

He also said Kiwibank staff had a "good insight" into what customers were currently paying for life insurance, although he wouldn't detail how much cheaper Kiwibank might be than rivals'.

Kiwi Insurance's financial statements show net premium revenue of NZ$3.37 million, up from NZ$2 million the previous year. Total operating revenue was NZ$4.75 million versus NZ$3.38 million, and total income NZ$4.96 million up from NZ$3.51 million. Net claims expense rose to NZ$428,043 from NZ$399,925.

Total equity, comprising NZ$6.6 million of share capital and NZ$5.4 million of retained earnings, was NZ$12 million as of June 30.  Total liabilities, including NZ$684,910 of policyholder liabilities, stood at NZ$1.97 million

For the year to June Kiwi Insurance's premiums received totaled NZ$7.2 million and its claims expenses paid were NZ$1.3 million. It made NZ$1.1 million worth of annual commission payments to Kiwibank to cover the origination of new insurance business.

AM Best, a credit rating agency specialising in the insurance sector, assigned Kiwi Insurance an A- financial strength rating, and an a- issuer credit rating, both with a stable outlook, last September saying it had shown a profitable operating performance in the past five years with return on equity averaging 25% despite full earnings retention and a NZ$6 million capital injection in 2011.

Kiwibank posted record annual profit of NZ$79.1 million for the year to June 30, 2012.

This article was first published in our email for paid subscribers. See here for more details and to subscribe.