Iag Injects New Blood To Fix Share Price Slump

The Age

Saturday October 27, 2007

Danny John, Sydney

INSURANCE Australia Group chief executive Michael Hawker laid his job on the line yesterday, downgrading revenue forecasts while appointing a potential successor in the shape of his former rival from Promina.

Mr Hawker and IAG's board, led by James Strong, sought to deflect investor criticism of the latest trading figures by strengthening the management team with Mike Wilkins, the former chief executive of Promina's AAMI-Vero insurance brands.

Mr Wilkins, who headed Promina for eight years before its $7.9 billion takeover by Suncorp this year, cut his last remaining ties with his old employer just over a month ago.

With shareholders growing increasingly restless about IAG's sagging share price since a 27 per cent fall in annual profit in August, the insurer offered little hope of an immediate recovery by cutting its expectations for a rise in premium income to between 7 and 9 per cent.

That compared to the 10-12 per cent figure that Mr Hawker was confidently predicting IAG would achieve for the 2008 year just two months ago.

IAG's woes have been compounded by a continuing squeeze on premiums at its recently acquired British insurance businesses, which are part of its $1.75 billion attempt to diversify overseas.

The company has also lost commercial insurance business in Australia, as plunging rates meant it faced writing unprofitable premiums.

Mr Hawker said yesterday that to continue doing so would have been "totally inappropriate and actually irresponsible".

And while disappointed at IAG's flagging share price, which has only been underpinned by speculation of a possible takeover bid from Sydney-based QBE, the IAG boss said he was "taking action to deliver the sort of returns" for which the market was looking.

But brokers indicated that the revenue and insurance margin downgrades - the latter to between 11 and 13 per cent - would cut earnings per share growth by up to 10 per cent next year.

IAG's share price fell 4? to $4.86 yesterday.