Insurance Australia Group Ltd., the Sydney-based insurer formed in 1925, will reduce headcount at its CGU sales unit by 16 percent by the end of 2015 to lower costs and boost profitability.
CGU, which sells insurance through intermediary channels including brokers, will cut its workforce by about 600 jobs to 3,100 positions, Peter Harmer, the unit’s chief executive officer, told reporters on a conference call. The reductions will help generate A$65 million ($69 million) in pretax savings, starting with A$25 million in the year ending June 30, 2013, IAG said today in a statement.
The insurer is adding to job losses across Australia’s finance industry, including more than 1,500 in announced cuts at Australia & New Zealand Banking Group Ltd. and Westpac Banking Corp. this year. Profit at IAG fell 11 percent to A$144 million in the six months to Dec. 31, the company said last month.
“Where possible, we will be managing the reductions in roles through natural attrition,” Harmer said in today’s statement. “We are very conscious of the impact that these changes will have on our employees and will be actively supporting them through this transition.”
The CGU division posted a fiscal first-half underwriting loss of A$103 million, IAG said last month. The unit’s combined ratio, which compares premium revenue to costs and claims, was 108.7 percent in the half-year. A rate above 100 indicates the business is unprofitable. Income of A$182 million from technical reserves pushed the unit to a profit of A$88 million in the first half.
Shares of IAG rose 2.5 percent to A$3.28 at 1:16 p.m. in Sydney, paring a decline over the past 12 months to 7.1 percent. The benchmark S&P/ASX 200 gained 0.5 percent today.
IAG bought CGU from Aviva Plc in 2003 and uses the business to distribute insurance products through a network of more than 1,000 brokers. It generated almost 31 percent of total IAG group premiums in the six months to Dec. 31, company documents show.
The insurer employs more than 9,000 people in Australia, said Andrew Tubb, an IAG spokesman.
Australian employers cut payrolls in February, pushing the jobless rate to 5.2 percent from 5.1 percent, a statistics bureau report showed yesterday.