IAG has announced major changes to its corporate structure, shedding four senior executives and under-performing assets.

The changes announced by CEO Mike Wilkins this morning are expected to deliver $130 million in annual pre-tax savings. Under his plan IAG will adopt a leaner corporate model and sell off its under-performing UK assets.

At a press conference this afternoon Mr Wilkins announced that 600 jobs at IAG in Australia - about 5% of the local workforce - will go.

Earlier, he told a meeting with analysts that IAG is still on track to deliver a full-year insurance margin at the low end of the projected 6-8% when he reports its full-year financial results on August 22.

Today’s announcement follows a review conducted by Mr Wilkins after he joined IAG in November.

As predicted on Monday by insuranceNEWS.com.au, the axe has fallen first on senior managers. CFO George Venardos, Group Actuary Tony Coleman, Group Executive Strategy, People and Reputation Christine McLoughlin and CEO Asset Management and Reinsurance Jan van der Schalk will all leave by year’s end.

The restructure is expected to cost $60 million.

Mr Wilkins has called time on the UK operations built up by his predecessor, Mike Hawker. He says all the UK private motor and mass market distribution ventures – Hastings/Advantage and Equity Insurance brokers, and the Alba and Diagonal investments – will be sold off. Only specialist motor underwriter Equity Red Star will be retained.

“It’s clear from our recent financial performance we need to do better,” Mr Wilkins said. “Our aim is to create shareholder value by making IAG a more tightly managed portfolio of high performing, customer-focused and diverse general insurance businesses.”

The successful Promina formula of “end-to-end businesses” with autonomy to manage their own brands, customer bases and markets will be introduced.

“Putting control closer to the end consumer or intermediary ultimately delivers superior customer experiences and performance,” he said.

Mr Wilkins has also indicated IAG’s divisions will be run as leaner operations.

Despite retreating from the fractious UK market, IAG will continue to look for foreign expansion opportunities in Asia, specifically in Thailand, Malaysia, India and China.

IAG will book a non-cash impairment charge of around $350 million in 2007/08.

For the year ending June 30, Mr Wilkins expects a 6% increase in gross written premium, declining to 3-5% in 2009. But the insurance margin is expected to grow to over 10% in the next financial year.

In line with analysts’ predictions, Mr Wilkins will cut the full year dividend from 29.5c last year to 22.5c.

IAG Chairman James Strong said in a statement that Mr Wilkins’ review “both confirms and enhances the board’s view of the fundamental value of the overall business” – a back-hander for failed suitor QBE, which walked away in May after the IAG board rebuffed its merger proposal.

And the board, which has been criticised by analysts for being light on experienced insurance people, will take on an industry heavyweight with the addition of Phil Twyman, Group Executive Director of British insurance giant Aviva, as a non-executive director.