IAG says internal reinsurance is the reason for a difference in reporting for its New Zealand operation.

In August IAG announced its New Zealand business made an insurance profit of $216 million – “a strong result” – in 2014/15.

But in results lodged with the NZ Companies Office last week the operation reports an insurance loss of $NZ762.6 million ($705.5 million).

An IAG spokesman told insuranceNEWS.com.au the difference is due to Australia including reinsurance in the insurance result and its New Zealand counterpart not doing so.

The New Zealand accounts show reinsurance revenue for 2014/15 was only $NZ278 million ($257 million).

Delving deeper, IAG paid $NZ662.2 million ($612.6 million) to its New Zealand operation from its reinsurance businesses in Malaysia and Singapore.

IAG New Zealand still has SNZ1 billion ($925 million) of expected reinsurance payments from outstanding claims.

As of July 1 IAG New Zealand will pay 20% of gross written premium to the group’s captive reinsurer.

The captive will pay 20% of all claims and pay a share of the New Zealand insurer’s operating costs, while also paying a percentage-based fee of the ceded premiums.

IAG New Zealand has blamed its woes on the Canterbury earthquakes.

The total cost of the quakes has been revised to $NZ1.1 billion ($1.01 billion) at June 30, compared with $NZ224 million ($207 million) a year earlier.

The New Zealand accounts show IAG recapitalised its local operations to the tune of $NZ800 million ($740 million) last December and a further $NZ200 million ($185 million) in April.

At June 30 IAG New Zealand had liabilities of $NZ6.1 billion ($5.6 billion) – below its total assets of $NZ7.5 billion ($6.9 billion).

The 2014/15 after-tax result for the New Zealand business was a loss of $NZ551 million ($509 million), compared with $NZ26 million ($24 million) profit the previous year.