IAG’s largest business Australia Direct is to exit the Queensland CTP market due to poor performance.
IAG will exit the Queensland CTP market on 1 January 2014. CTP represents 20% of Australia’s Direct premium base circa $900m in FY13, IAG has a 5% market share in Queensland, which is roughly $60m.
Explaining the group’s decision at an investor briefing yesterday, group CEO Mike Wilkins said: “We have long called out the unsatisfactory performance in the Queensland CTP market [..].”
He also conceded thet IAG expects “some modest loss of market share” in the ACT CTP market after Suncorp was granted ACT CTP licences in June.
This comes as the NSW Government abandoned reforms to the NSW CTP greenslip scheme, allegedly due to a lack of support.
“We remain in active dialogue with the government and the regulator in this review process,” Wilkins said. “And we are confident that over the long term the necessary reforms will be addressed but at this stage it looks as if nothing’s going to happen with the NSW CTP scheme until at least the middle of next year and it could be later than that.”
“Notwithstanding that, CTP remains a core product for us and a profitable part of our Australia Direct business,” he assured stakeholders.
Australia Direct delivered a GWP of $4.6bn, slightly up on 2012’s $4.3bn; underwriting profit soared from $20m to $609m; and insurance profit climbed to $822m, up from $544m in 2012.
IAG’s intermediated business CGU’s underwriting result swung back into the black, delivering an underwriting profit of $397m in the full year 2013, an improvement on a loss of $117 in 2012.
Gross written premium rose 9.7% to $3bn in FY13, compared to $2.8bn in FY12, insurance profit was $470m compared to $258 the previous corresponding period; and the combined operating ratio improved 20 percentage points to 84.9%.
CGU delivered an insurance margin of 17.8%, assisted by higher than expected reserve releases and a favourable credit spread movement.
Overall, IAG posted an insurance profit of more than $1.4bn (2012: $845m). The group’s net profit after tax also improved, from $207m to $776m; and GWP was up 11.8% to $9.5bn.
Wilkins hailed the group’s “strong” result.