Still no AMI call on Govt funds

AMI has still not called on Government financial support although Finance Minister Bill English continued to offer Government support to the troubled insurer.

Commenting yesterday on the release of AMI's financial report for the year ended June 30, Mr English said AMI was using its own capital reserves and reinsurance to pay claims from the Canterbury earthquakes as they came due.

"When we put the AMI policyholder support agreement in place back in April, AMI started a programme to raise fresh capital.

"The Treasury has been working closely with the AMI board on securing new private capital for the company."

If called upon, the support package of "last resort" would involve the Government investing up to $500 million of equity in the insurer, with the right to take ownership and assume control of the company if needed, Mr English said.

The ultimate cost to the Government would depend on the final cost of AMI's claims - which remained uncertain - and the outcome of AMI's recapitalisation process, which was still under way.

Based on the $705 million annual loss reported by AMI yesterday , the best current estimate of the likely cost of the Government's support package was $337 million, Mr English said.

The AMI accounts showed AMI reported an operating profit of $87 million, excluding the impact of earthquake claims costs and reinsurance reinstatement premiums of $33 million.

The earthquake costs, net of insurance, were $760 million, to give a reported after-tax loss of $705 million.

AMI included the Government's $500 million on its balance sheet and reported capital at balance date of $139 million.

Gross written premium growth in the year was up 6.5% to $363 million. The company had investment income of $25.4 million at balance date and total assets of $2.3 billion, including the Government's $500 million support package.

AMI chairman Kerry Noland said AMI insured about a third of the homes in the Canterbury region, more than any other insurance company. About 20% of the premium income came from Canterbury.

Payment of the bulk of earthquake claims was likely to be spread over three financial years. It was estimated more than a third of claims would be paid out in the current year, a similar in the June 2013 year and about 20% the following year.

AMI estimated 95% of all earthquake-related claims would be paid out by June 30, 2015.

"To many, this may seem a very elongated timetable. In fact, it simply reflects the reality of the earthquakes' aftermath in Canterbury and the difficulties in being precise about the amount and timing of claim payments," Mr Noland said.

AMI had established a capital restructuring board committee and appointed Goldman Sachs as advisers.

Several potential investors has been identified and approaches had been received from interested parties.

 

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