IAG’s intermediated division is confident it will achieve a $250 million profit target next financial year as rate gains are put through and steps taken to improve the performance of the business, an investor briefing heard yesterday. 

Intermediated Insurance Australia Group Executive Jarrod Hill said the focus has been on simplification and enhancing underwriting and pricing skills, while the leadership team has been strengthened and building blocks laid to meet the profit target and future ambitions. 

“We’ve already set the operating structure, made pricing decisions and written a reasonable portion of the business that will determine earnings next year,” he said. 

The division has put through an average price increase of 15% across the portfolio in the second half of the current financial year, up from just under 11% in the first six months. 

“We are currently operating in a favourable market environment. We are seeing the market generally looking to recover higher claims and other costs through rate,” Mr Hill said. “This has been a key driver in growth of the intermediated insurance market in recent years. We expect very similar conditions to persist in FY24.” 

A ground-up review of rates in long-tail classes has been completed, driven by liability issues that emerged in a previous year-end valuation. 

“We’ve taken very specific portfolio actions, existing certain segments and being very clear on appetite, as informed by that valuation,” he said. 

“The team has delivered new pricing tools, providing far more granular and accurate pricing for our liability and our agri portfolios. Price increases have been deployed across the remainder of our business at a much faster pace than historically achieved.” 

Mr Hill said the $250 million profit target did not represent “peak earnings” for the business and the focus would remain on simplification, while a strategic transformation program across insurance technology platforms would start in the coming financial year. 

“With a more competitive cost base, alongside enhanced core insurance capabilities, profitability will continue to improve,” he said. “With these capabilities embedded in the business, we will then turn our attention to growth.” 

Mr Hill says investment in technology is being seen as an ongoing focus across the market, involving brokers and insurers. 

“This is as the industry looks to remove frictional cost, improve efficiency and provide affordable product offerings,” he said. 

IAG announced in November 2020 that it would split its Australian business into direct and intermediated divisions, later appointing Mr Hill to drive a turnaround of the intermediated operations. The division reported a loss of $103 million in fiscal 2022, reflecting natural perils costs and reserve strengthening for commercial liability.