IAG’s intermediated division head says the business is well placed to achieve profitability gains in a softer price environment after beating an earnings target last financial year.

CGU and WFI CEO Jarrod Hill says the division exceeded the $250 million target through underwriting pricing and cost discipline, and both will remain a focus as it seeks to grow the portfolio and build market share.

“We will remain highly selective as we manage the portfolio, with ongoing margin improvement our priority,” he told an investor day briefing this week.

Mr Hill says the intermediated business continued to see rate increases across the portfolio during the first quarter.

“We’re certainly not seeing the market rate drop below inflation at the moment for our commercial business. It’s still a rational market, but it’s clear it’s a market in transition and we won’t have another year of rate increases as we’ve seen in the past; it will happen in pockets.”

IAG’s investments in the intermediated business and improved capabilities leave it well placed to deliver margin improvement and manage its way through a softer cycle, he says.

“We have rebuilt the CGU brand with brokers and are increasingly being recognised as a preferred partner,” he said. “In WFI, we’ve turned around performance to the extent that we now have the confidence in this portfolio to develop WFI as a growth engine.”

Mr Hill says legacy technology systems continue to inhibit the business’ ability to compete as effectively as it would like, but a core platform modernisation program is moving ahead.

“We believe the commercial insurance market in Australia will face continued change in the next few years, driven by external factors,” he said.

These include a softer rate environment, further broker consolidation, with new entrants driving competition for talent and customers, investment in technology by brokers to support divergent strategies, a heightened focus on value and costs, and changing customer preferences “requiring a wider range of digital and real-time automated engagement channels”.