Insurance Australia : Australia Direct to maintain strong market position and profitibility

Insurance Australia Group Limited (IAG) today provided an update on its Australia Direct business, outlining the division's strategy to maintain its strong market position and underlying profitability in the Australian direct personal lines market.

At the briefing in Sydney, IAG Managing Director and Chief Executive Officer, Mr Mike Wilkins, emphasised the high-performing nature of Australia Direct and its significance to the Group. In the recently reported results for the six months to 31 December 2013, Australia Direct represented 48% of the Group's gross written premium (GWP) and 54% of insurance profit for the period.

Australia Direct generates over $4.5 billion GWP per annum and operates through a multi-channel model, with its range of iconic brands servicing around 3.5 million customers. Significant market shares are held in the motor and home segments, as well as compulsory third party (CTP) insurance in New South Wales.

"Our strategy is to deliver a superior customer experience, coupled with low operating costs," said Mr Andy Cornish, Chief Executive Officer of Australia Direct. "We have market-leading capabilities in customer insights, digital offerings and risk assessment and selection. We are also leveraging our scale to realise supply chain improvements, both in terms of customer service and cost. We are confident this strategy will sustain our strong market position and performance," he said.

The Group has reaffirmed its guidance for the financial year ending 30 June 2014 (FY14), comprising GWP growth of 3-5% and a reported margin in the range of 14.5-16.5%¹. Within this, the Australia Direct business is expected to report relatively flat GWP and an improvement in its underlying margin, compared to FY13.

• ¹ Reported insurance margin guidance for FY14 includes the following assumptions:
• - Net natural peril claim costs of $640 million, in line with allowance;
• - Reserve releases of around 3% of net earned premium; and
• - No material movement in foreign exchange rates or investment markets in 2H14.

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