Insurance Australia Group Limited (IAG) announced that it is restructuring its “operating model” for its Australia Intermediated business, CGU. The changes are aimed at generating “annual cost savings of around $65 million pre-tax by the end of the 2015 financial year.”
Mike Wilkins IAG’s Managing Director and CEO, explained: “Since resetting its strategy in 2008, CGU’s focus on remediation and rebuilding has improved its underlying performance by around $160 million on an annualized basis. With the work to improve the fundamentals of the business well progressed, we believe the time is right to accelerate the actions we are taking.”
CGU’s CEO, Peter Harmer, described the move as an “important step change for CGU.” He stated that it would simplify “our structure, making it easier for brokers and agents to deal with us and access the immense knowledge and expertise that sits within our organization.”
Harmer added, almost as an afterthought, that the restructuring of CGU’s operating model “would result in a reduction of around 600 roles over the next three years.” However, he did indicate that “where possible, we will be managing the reductions in roles through natural attrition. We are very conscious of the impact that these changes will have on our employees and will be actively supporting them through this transition.”
Wilkins noted that the “changes announced to CGU’s operating model today are expected to generate initial cost savings of $25 million pre-tax in the 2013 financial year, increasing to an annual pre-tax benefit of $65 million by the end of the 2015 financial year. This will continue the improving trend in CGU’s financial performance.”
He also indicated that the “cost of implementing the operating model was approximately $75 million pre-tax, of which $35 million would be recognized in the second half of the 2012 financial year with the balance to be incurred in the 2013 financial year. These items will be recognized as a corporate cost in IAG’s reported results, reflecting their one-off nature.”
Source: Insurance Australia Group
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