IAG expects tough market conditions to continue for its intermediated business this year and is accelerating a technology overhaul to enhance performance, while its retail operations are tipped to drive premium gains.

Gross written premium last financial year grew 7.6% to $18.4 billion, driven by the Australian and New Zealand direct retail businesses and including a 10-month RACQ Insurance contribution.

GWP growth of 5%-8% is expected this year, reflecting mid single digit retail growth, low single digit intermediated gains and a further RACQ contribution.

CEO Nick Hawkins says premium growth in direct retail accelerated in the fourth quarter, supported by volume and price, and the trend is expected to continue this year.

CGU and WFI head Jarrod Hill says Australian commercial has been in the competitive phase of the pricing cycle for at least 12 months.

“We see the current market conditions continuing through FY27 and we’ve built our business plan accordingly to operate in these market conditions for this financial year,” he told insuranceNEWS.com.au.

Mr Hill says the company is investing in artificial intelligence and has accelerated a major technology transformation, which has created issues for brokers in the past year.

“We continue to be very diligent in resolving those challenges and getting back to the service levels that we expect for our broking partners,” Mr Hill said.

“What we do know is the capability we’re building is going to put us in a position to serve our customers and their clients in a far more efficient and a far more professional manner than we ever have, and that’s really exciting.”

Mr Hill says IAG’s intermediated business is well placed to manage inflation impacts amid competition.

Clients are increasing sums insured, and the group will make tough decisions where necessary, with examples including shrinking in strata as more attractive opportunities are pursued.

“We’ve continued to grow. We were pleased with modest growth that we achieved in our SME portfolio, in our rural portfolio and our commercial motor portfolio,” Mr Hill said. “That’s in line with our plan, and we expect to continue to grow those portfolios.”

In larger corporate accounts, where competition is greatest, the insurer aims to maintain the portfolio size.

IAG’s full-year net profit fell 24.8% to $1.022 billion last year amid higher natural peril costs and after a business interruption provision release boosted the previous period.

The underlying insurance profit rose 2.3% to $1.578 billion, equating to a 15% margin.