IAG 2011 Annual Review

CGU is delighted to be celebrating 160 years of insuring Australians this year. This important milestone has enabled us to celebrate our heritage, our trusted brand and our presence in local communities through our network of over 70 national branches. It has also been a great opportunity to consider how we will build on this heritage in the future.

---

CGU continued to improve its underlying performance during the year as we realised the rewards of the work undertaken over the past few years to refocus on business fundamentals.

Results

Compared to last year, our gross written premium increased by 8.8% to $2,463 million and our expense ratio improved, although our insurance margin declined slightly, from 6.6% in financial year 2010 to 6.5%, largely due to the impact of the storms and cyclones which Australia experienced earlier in the year.

Assisting customers and colleagues

Natural catastrophes and severe weather were high profile issues in 2011 and CGU rose to the challenge. We received over 25,000 claims from these events and our people worked tirelessly to assist our customers. Our offices in Brisbane were affected by the floods, as were a number of our employees. We are very proud of the way our people pulled together to assist their colleagues and customers in their time of need. The summer of natural disasters led to insurance being placed firmly on the public and government agendas, as Australia became more focused on protecting itself from such events.

To contribute to the solution, CGU has invested significant time and resources this year to enable us to include flood cover in our home and contents policies in 2012.

Driving profitable growth

From the solid platform we have established, we are now focused on driving profitable growth by pursuing three strategic themes.

First, we are focused on channel management, developing a more sales-led, relationship-based approach and making it easier for our intermediary partners to do business with us. Second, we are improving our ability to gain insights into the needs of our customers so we can increase our value to our customers and our intermediaries by building more relevant products and improving the processes and systems we use to deliver our services. For example, we have established an innovative partnership with Telstra to provide its customers with the option of handset insurance at the point of sale in its stores. Third, we continue to build our underwriting expertise and have formed an Underwriting Centre to enable us to improve this capability further in future.

We continue to look at growth opportunities and recently acquired the general insurance business of Western Australia-based health fund, HBF Insurance, which we expect to generate over $100 million of gross written premium each year. We have reduced our expense base this year and this will continue to be a focus. Our commitment to our strategy will enable CGU to keep delivering improvements in underlying performance, focus on driving profitable growth and achieve our goal of delivering a double-digit insurance margin.

• ¹More information about IAG’s activities to build sustainable businesses and communities including the greenhouse gas emissions profile is available at www.iag.com.au/sustainable.
• ²Risks in force or policies in force.