Christchurch-based AMI has appointed Goldman Sachs to advise it on a recapitalisation so it can avoid using the New Zealand Government’s $NZ500 million ($373 million) rescue package. It has also sent CEO John Balmforth abroad to negotiate fresh reinsurance for beyond June 30.

The insurer faced insolvency following the February 22 Christchurch earthquake and was bailed out by the Government, which was concerned about the impact of failure on the rebuilding of Canterbury, where AMI holds about 35% of the residential market.

AMI said last week that although it is still awaiting all claims from the second quake, it believes they will exceed its $NZ600 million ($448 million) of reinsurance cover.

Government backing means it can use its $NZ350 million of reserves once the reinsurance is exhausted without breaching insurance regulations. Reserve Bank documents released under the Official Information Act show that in March AMI estimated gross claims from the second quake of between $NZ1-$NZ1.5 billion ($747 million-$1.1 billion).

Chairman Kerry Nolan says the mutual does not have a cashflow problem, “but we need to address the company’s capital structure for the long term”.

Fresh capital would enable the company to redeem the unpaid convertible preference shares it issued to the Government as part of the rescue package, before any Government funds were drawn upon.

Mr Nolan says several capital-raising options are available and the process might take several months while the company determines its liabilities from the second quake. It expects to be able to quantify its exposure by the end of August.

He says that despite negative publicity, “healthy new business continues to be written, with a net loss of fewer than 10% of policies since 22 February”.

AMI has also trebled the size of its earthquake response team and hired well-known industry figure Peter Rose as executive manager of the team.

Mr Rose set up AA Insurance in New Zealand and worked for AMI’s actuarial consultants, Finity, before establishing his own Sydney-based consultancy.