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IAG reports ‘low single digit’ premium growth in Q1, defends pay deal

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IAG recorded “low single digit” growth in gross written premium in the opening quarter of the current financial year, the insurer told shareholders at Friday’s annual general meeting.

CEO Peter Harmer, who is retiring and will be replaced by Nick Hawkins on November 2, says the insurance profit for the September quarter “reflects the seasonally low incidence of natural peril events in this period, while underlying profitability has been similar to that seen in the second half of the previous financial year”.

“Within our underlying insurance margin, combined COVID-19 related effects have been broadly neutral during this period, with some benefit from lower motor claims frequency offset by incremental expense and provisioning impacts,” Mr Harmer said.

During the meeting IAG was forced to defend its proposed pay deal as employee unhappiness over remuneration conditions spilled into the open.

A number of employees, who are also shareholders, spoke against the salary proposal at the AGM. One of them said the deal is “insulting” to staff who have stood by the business during difficult times. The insurer was also accused of having a “bias against re-employing past staff”.

But IAG stood by its proposed enterprise pay and conditions agreement, which was made following the August 2020 pay review and reflected the business impact of COVID-19. It says there will be no increase in fixed pay for senior managers and no increase in fees for directors.

Eligible employees below the top three layers of management were given a fixed pay increase of 1% and none received a payment under the insurer’s short-term incentive plan for the last financial year.

“We also believe that the remuneration structure that we have throughout the organisation is fair to our executives and to all our staff members, that we pay good market rates to all our people and that we have a very positive working environment,” Chairman Elizabeth Bryan said.

Mr Harmer says the insurer has “re-included reference to the [short-term incentive]” following representation from the union after having initially removed it from the enterprise agreement.

“In relation to the enterprise agreement, originally we did seek to eliminate reference to the [short term incentive] not because we were concerned about paying it,” Mr Harmer said.

He says it was “simply because as we have had the experience of this year already, there may be financial circumstances when we are unable to pay a short-term incentive or to pay a bonus”.

“It is a bonus which is designed to reward superior performance and I think it’s really important that we continue to have that sort of mindset towards our bonus.”

Mr Harmer says the decision to offshore jobs to India and the Philippines a few years ago “raised some risks” when the pandemic broke out. He made the comments in response to a shareholder who said outsourcing the jobs to another country has left consultants unable to fully manage case situations.

Mr Harmer says IAG has since moved more than 500 roles permanently back to Australia and New Zealand.