As 2022 approaches, insurance giant Insurance Australia Group (IAG) has shared its strategic initiatives for its three operating businesses and reaffirmed its reported margin and gross written premium (GWP) guidance for the financial year 2021-22 (FY22).
During IAG's business update, managing director and CEO Nick Hawkins met with his leadership team's members to identify which initiatives the group will implement in its three businesses to achieve its objective: to create a stronger, more resilient IAG.
Hawkins said the insurer's objectives have not changed since February 2021, still aiming to deliver 12% to 13% targeted cash ROE, 15% to 17% insurance margin, and a growth profile over the medium term.
In the next five years, IAG aims to add one million customers to the 8.5 million it already serves, and ensure that more than 80% of customers' activity goes digital.
“Our ability to invest time and effort in delivering on our growth agenda is rapidly improving. We're already seeing a turnaround in our intermediated business in Australia as we work to deliver at least $250 million of insurance profit in that business by FY24,” Hawkins said.
“Our direct business in Australia has launched its growth plan, taking NRMA Insurance national and setting itself up as a serious player in the youth market with Rollin', and our New Zealand business continues to strengthen its foundations and deliver ongoing strong results.”
Direct Insurance Australia, the group's largest operating business, aims to add 750,000 of the one million customers the company aims to attract over the next five years and deliver $400 million of value through initiatives to increase claims and supply chain effectiveness.
Hawkins also revealed organisation-wide initiatives to differentiate the business and improve customer outcomes, including simplifying the processes and technology that support the business.
“We are well on the way to establishing an enterprise platform that will simplify our back office, improve our risk processes, and reduce our costs to serve. This will create opportunities to grow and improve our customer experiences,” he said.
“We are focused on where our scale can deliver operating or structural advantages that can differentiate our company, particularly in areas of supply chain, claims handling, and underwriting. Claims optimisation and supply chain efficiency are common threads across all our businesses and can deliver real financial benefits.”
Meanwhile, IAG chief financial officer Michelle McPherson reaffirmed the group's FY22 guidance of a 10% to 12% reported insurance margin and low single-digit GWP growth.
The insurance giant also recently updated its net natural perils claims costs for FY22 following the storms that devastated parts of South Australia, Victoria, and Tasmania this year.
It anticipates that the net cost for the event could reach $169 million, the maximum retention for a first loss under its catastrophe program. As a result, it increased its expectation for FY22 net natural perils claims costs to $1,045 million, a significant increase from the previous assumption of $765 million.