Home / Corporate / IAG lays out 'ambitious' plan to turn business around
13 December 2021
IAG has set out what analysts have described as an “ambitious” five-year program to revitalise the business, after past lapses caused the insurer to report a $427 million net loss in the last financial year.
Last week CEO Nick Hawkins and his team outlined details of the business plan, which includes adding one million new customers primarily through the expansion of the NRMA Insurance brand.
IAG aims also to rejuvenate its loss-making Intermediated Insurance Australia division under Group Executive Jarrod Hill, who said at last week’s business update that he is establishing a dedicated underwriting office to drive a “step change” in its underwriting process and will appoint a senior leader to this role in the very near future.
Institutional brokerage Hunter Green Insurance Analyst Mark Tomlins says the five-year plan is “certainly ambitious” given the insurer has been losing market share in recent years.
“But [it] is also achievable given it is not seeking to grow much faster than the market,” Mr Tomlins told insuranceNEWS.com.au.
“However, large ships are slow to turn, so it wouldn’t surprise me if IAG took a little time to turn around market share losses, and I think IAG’s ability to turn around market share losses quickly without using price is potentially upbeat.”
Mr Hawkins says the insurer will not be relying on a “price-led” strategy to achieve the one million customer target in Australia and New Zealand.
He says the target will be realised by targeting new regions and market segments, one that is already taking shape through the launch of NRMA Insurance nationally to WA, SA and the NT as well as the introduction of Rollin’.
IAG launched Rollin’ last month with a digital motor insurance offering aimed at consumers in their 20s and 30s.
Direct Insurance Australia Group Executive Julie Batch says the business is not attracting as many younger customers as it should, describing the situation as a “missed opportunity”.
“So we are solving this problem by launching a digital business for the younger generation,” Ms Batch said.
She says the business, like the rest of the industry, is feeling the fallout from material shortages such as timber.
“That is causing us… to go offshore to purchase more materials and we've seen an increase in the cost to repair as a result of more dependency than we would normally do on a global supply chain in property,” Ms Batch said.
Hunter Green says in a client note that IAG has many attractions including great brands and a positive premium rate outlook.
“Its strategic targets add the potential for improved future business performance and support us retaining our positive outlook on the stock despite the headwinds in the current environment,” the client note said.
These headwinds include the continued risk of further COVID outbreaks, likelihood of higher inflation requiring further reserve strengthening and playing catch-up to climate challenges.
“This is not to downplay the impressive capabilities the group has around climate,” Mr Tomlins said in reference to climate risk.
“However, solving the problem of climate change is bigger than IAG. It can only act to reduce its exposure, or price accordingly for the evolving risk.”