“Business as Usual” says AMI Insurance Buyer

Media Release ¬– 16 December 2011

“Business as Usual” says AMI Insurance Buyer: Govt Will Oversee Earthquake Claims Resolution Through Separate Company

The Board of AMI Insurance has accepted a conditional offer from IAG to purchase 100% of a reconfigured AMI company with a separate Government-owned company being established to steadily resolve all AMI earthquake claims existing at the time of purchase.

IAG’s New Zealand CEO, Jacki Johnson, said the long established AMI general insurance business is an ideal fit for its existing insurance activities in New Zealand, and vowed to be a committed guardian of the AMI brand, its people and its customers in New Zealand.

“We respect AMI’s customer-focused ethos and people and its commitment to the communities it serves. We are delighted to be welcoming such an iconic brand and business to our organisation.

“We are impressed with AMI’s business, people and brand and we will be focusing on building on these strengths to help us increase our presence in the New Zealand market.”

BUSINESS AS USUAL AT AMI

IAG needs to obtain the consents from the Reserve Bank, Commerce Commission and Overseas Investment Office before the purchase can become unconditional some time early next year. Until then, there will be no change.

AMI chairman Kerry Nolan said in the meantime it’s business as usual, and AMI customers will not notice any difference in their normal day to day dealings with AMI or in the progression of their earthquake claims. “When there are any changes that customers need to know about, we will contact them well in advance”

IAG’s offer is for a newly incorporated company that will have transferred to it all of the existing national AMI business, built up since 1926. The exception is that all AMI Canterbury earthquake claims outstanding at the time of purchase will remain with the current company, which will be owned and backed by the Government and given a new name. There will be no other link between the companies.

The new AMI company will acquire almost 500,000 New Zealand customers holding some 1.2 million insurance policies, mainly on houses, contents and cars.

RESOLVING EARTHQUAKE CLAIMS

The only remaining business of the existing AMI company, to be given a new name at the time of separation, will be the resolution of Canterbury earthquake claims becoming unconditional. This company will have the financial backing of the Crown, which has backed AMI through a Crown Support Deed since April 2011, to ensure there was no disruption to the Canterbury earthquake recovery.

AMI insures one home in three in Christchurch and the company has already established a dedicated earthquake recovery team of more than 200 people with Arrow International. This operation will be the core of the Government backed earthquake resolution company, which will have significant capital available, including reinsurance money.

Estimates of the cost of resolving AMI’s earthquake claims continue to increase, but are currently around $18 billion. The Government will fund whatever shortfall eventuates over the next few years, as claims are progressively settled, and has budgeted over $300 million for this purpose.

BEST OUTCOME FOR ALL

“The IAG offer for the national insurance business, and the Government undertaking to stand behind a separate earthquake claims resolution business, is the best possible outcome for all policyholders, earthquake claimants and other stakeholders

“The AMI Insurance name will carry on, as a part of a financially strong owner, freed from the uncertainty of the eventual cost of earthquake claims, with the Government giving assurance that all AMI earthquake claims will be met in line with the terms of customers’ insurance policies.

“The February earthquake created a very serious loss of capital for AMI, and it is gratifying that just nine months on we are able to announce a conditional new arrangement which promises strength, certainty and continuity.”

ENDS

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