IAG sees 'momentum' in its loss-making broker business

IAG Intermediated Insurance Australia (IIA) has a “little bit of momentum” and is still on track to turn profitable by the 2023/24 financial year as targetted, CEO Nick Hawkins says.

The division’s losses worsened in the last financial year to $103 million from $10 million a year earlier, reflecting a higher natural peril cost and prior year reserve strengthening of $151 million for commercial liability.

But the underlying margin improved to 5% from 3.9% and the division achieved average premium rate rises of about 9%.

Mr Hawkins says Jarrod Hill, who heads IIA, has spent his time since joining IAG in September last year from Chubb Australia strengthening underwriting and building up the division.

“Our intermediated insurance business in Australia has been a challenge for us for a number of years,” Mr Hawkins said last week in an earnings call following the release of IAG’s annual results.

“[But] we can see a little bit of momentum there. Our premiums are up on average across the entire business unit 9% over the last 12 months.”

IIA makes up 32% of IAG’s overall gross written premium (GWP). The division increased its GWP by 6% to $4.29 billion in the last financial year, with at least high single-digit growth achieved across all major classes.

Commercial short-tail GWP rose 8.7% to $2.06 billion, commercial long-tail 15.6% to $1.02 billion but personal lines fell 4.9% to $1.2 billion.

“[The] market backdrop remains supportive of underlying margin improvement,” IAG says. “Solid overall retention levels have been supplemented by pockets of new business.”

IAG says the division continues to enhance its product offerings, strengthen its partnerships and improve the quality of its customer service.

The division’s key initiatives include simplification and improvement of digital broker and partner platforms and expansion of its broker traded product offerings; and launch of a new service model in CGU called BrokerPoint, which will deliver an improved broker experience and more efficient servicing, underpinned by digital capability.

“There’s a number of strategies that we’re delivering that will change the shape of the portfolio,” Mr Hill said.

“So we’re talking about portfolio optimisation, we’re shaping that portfolio in line with our profitability targets and our risk selection.”

He says the division has also set up an “inflation taskforce” to manage the cost pressures facing the business.

The taskforce sits within its pricing division and is designed to ensure the business addresses “any changes quickly in our pricing and our risk acceptance”, Mr Hill said.