IAG’s takeover of New Zealand insurer AMI Insurance has delivered more than expected, according to ratings agency Standard & Poor’s (S&P), which has given AMI an AA- financial strength rating.

AMI needed a government bailout after incurring huge liabilities from the Canterbury earthquakes, and was sold to IAG in April 2012 for $NZ380 million ($372.84 million).

The quake claims were split into a separate state-owned company, Southern Response.

S&P Credit Analyst Caroline Strahan says IAG expected benefits from merging AMI into its New Zealand operations, but these have exceeded expectations.

Customers have largely remained loyal to the brand and IAG has brought AMI’s underwriting and pricing in line with industry levels.

“It had a strong marketing campaign and retained branches, branding and customer service levels,” Ms Strahan told insuranceNEWS.com.au.

In 2012 IAG expected AMI to generate at least $NZ30 million ($29.43 million) a year in savings.

“IAG now expects annual realised synergies of $NZ45 million ($44.15 million) from [the] year ending June 30... arising from consolidation of claims services, shared services such as back-office functions, as well as shared procurement, investment and reinsurance arrangements with the group,” Ms Strahan said.

IAG also owns NZI, State Insurance and Lumley NZ. Although it has kept AMI branches, it has made savings by closing 21 State Insurance offices.

AMI had a long history as a profitable insurer before the Christchurch quakes. S&P says gross written premium grew 6% to $NZ457.2 million ($448.2 million) in the year to last June 30, giving it market share of 8.7%.

Its loss ratio improved to 62.6% from 70% in the year and its underwriting margin grew to 13.3% from 6.1%.

“It makes a material contribution to group profit, earnings diversity and scale, and its business risk is considered commensurate with the group.”

The insurer is consistently ranked as a preferred insurance brand and has high levels of customer loyalty and retention.

S&P has rated AMI as a core business of IAG, although it expects IAG’s New Zealand subsidiaries will eventually be consolidated and operate under one insurance licence, with the brands being retained.