IAG has applied to the prudential regulator for a separate licence for its intermediated business as it looks to sharpen its commercial and retail focus within the overall company.

Intermediated head Jarrod Hill says it could be the second half of next year before the licensing process is finalised. Under the proposal, there will be no change to the CGU and WFI trading brands.

IAG’s Intermediated Insurance Australia profit grew 57% to $328 million last financial year, surpassing the $250 million target set about three years ago when the business was loss-making.

At its annual results presentation, the company highlighted the distinct product, distribution and technology requirements of the intermediated division.

“This is really just [raising] the focus on that and making sure that we’ve got the options so we can bring product to our broker partners in a more efficient manner, and to make sure we’ve got all the capital options that we need to be as efficient as we can for a broker business,” Mr Hill told insuranceNEWS.com.au.

Mr Hill says the division achieved good policy growth within its underwritten lines last financial year, particularly in commercial property and the fleet business, and workers’ compensation is expanding after changes in recent years.

SME digitally traded business still operating on old technology has remained a relative laggard and Mr Hill says there is a focus on investment to improve digital capability, to enable growth in high-volume platform business and to assist brokers in personal lines business.

Mr Hill says IAG has also been building in the mid to large accounts space, where growth has been seen in commercial property.

“We do see an opportunity to grow in the large account space, but it’s supplementary to the core of who we are,” he said.

Mr Hill, who took on leadership of the intermediated division in September 2021, says the commercial market overall is moderating, but with differences across segments.

Some increased competition has been seen from the London market and new underwriting agencies.

“We haven’t seen a huge influx of insurers coming into the market,” he said. “What we are seeing, though, is the incumbent market appetite has expanded, and that’s provided additional capacity.”

Intermediated GWP increased 6.4% to $5.1 billion, with the underlying insurance margin improving to 9.6% from 7.7% as it benefited from earned premium growth, a lower underlying loss ratio and higher investment income.

IAG CEO Nick Hawkins says now the intermediated business has passed the $250 million earnings target, he expects it to achieve margins in the “low teens over the next couple of years”.

Mr Hawkins says improved performance in the division reflects a focus on underwriting discipline, while there has been a 23-point improvement in the broker net promotor score.

“We know that we can continue on this trajectory as we set the business up for the next phase of its growth,” he said.

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