Insurance Australia Group is overhauling its operating model in Australia as the company prepares to absorb the $1.85 billion Wesfarmers insurance acquisition into its fold, with the changes likely leading to job losses.
IAG’s new model will span three divisions – personal insurance, commercial insurance and enterprise operations. The changes, which take effect from July 1, means the units will share certain support functions including administration, human resources, technology and finance, an IAG spokesman said.
High-profile IAG executive Andy Cornish, currently the boss of Australia Direct, will lead the personal insurance arm, while his respected counterpart Peter Harmer, who oversees CGU, will head the commercial insurance unit.
Alex Harrison, currently the chief operating officer for Australia Direct, will be the new boss of IAG’s enterprise operations.
The changes could lead to potential job losses as certain services fall under a centralised arm.
An IAG spokesman said it was too soon to put a figure on head count reduction.
“There’s going to be an update at the time of [IAG’s profit] results [in August],” he told The Australian Financial Review.
“We expect this will make IAG a more customer focused and efficient company, and that will mean that there’s likely going to be an impact on jobs – but it’s too soon to tell.”
IAG is one of the country’s biggest insurers, controlling well-known insurance brands such as NRMA and SGIO.
The changes will also see IAG’s chief strategy officer, Leona Murphy, take on the new role of group executive transformation.
Ms Murphy will return to her current position on completion of the business restructure and will continue reporting to IAG boss, Mike Wilkins.
Mr Wilkins said the new operating model would allow the Australian business to better respond to its consumer requirements.
“We must continue to anticipate, adapt and respond to our customers’ changing needs.
“The new operating model will allow our personal insurance and commercial insurance divisions to be entirely focused on meeting those needs. We’re in a strong financial position and now is the right time to set ourselves up for the next phase of development and that’s what we’re doing.”
CLSA insurance analyst Jan van der Schalk believed the restructure was a “sensible” move.
“[It] anticipates the integrating WesInsurance whilst ensuring that appropriate synergy benefits are captured,” he said.
“Furthermore, as the needs of both personal and commercial clients grow more complex and sophisticated, this structure focuses IAG Australia to providing the best service to each without distraction.”
The restructure comes two years after IAG’s broking business CGU flagged plans to cut up to 600 jobs as part of a drive to slash $65 million in annual costs within three years.
IAG announced last December that it would snap up retail giant Wesfarmers’ insurance underwriting business in a $1.85 billion deal that would make the combined business the biggest insurer in Australia and New Zealand.
IAG’s share price has risen 4.14 per cent in the past 12 months to close at $5.79 on Thursday.
The company’s share price has under-performed the benchmark S&P/ASX200 index’s 6.1 per cent rise during the same period.
Australian Financial Review