Chief
Executive
Officer's
Review

Focus on the future drives the new IAG

Following a year of transformation and consolidation, we have laid the foundations for the new IAG and are now firmly focused on the future.

Focus on a common Purpose, Strategy and Vision
Building the new IAG means changing the way we think, act and work together, and we have set principles which guide all our decisions and actions.

We have united all of our people behind a common Purpose: we help make your world a safer place.

Our strategy provides a clear articulation of what we are here to do: deliver great customer experiences by leveraging our market leadership to create value for our customers, people, partners, shareholders and the community.

These principles culminate in our vision statement which outlines what we aspire to be: Asia Pacific’s most loved, most inventive and most successful insurer.

Bringing our Purpose and Vision to life
Our Purpose and Vision resonate deeply with our people and the shared value section of this review has some excellent examples of how we are bringing these principles to life.

As a Group, we are embracing the phrase ‘most inventive’, with a commitment to think more creatively about the way we do business, solve problems and serve our customers. To reflect the growing importance of digital in everything we do, in July 2015 we created IAG Labs, and appointed Peter Harmer to the role of its Chief Executive, responsible for driving digitisation and innovation across IAG and its brands.

We are also working to make the world a safer place by mitigating the impact of natural disasters through the activities of the IAG-led Australian Business Roundtable for Disaster Resilience & Safer Communities.

The Roundtable has released two significant evidence-based papers to the Australian Government and these contributed to the findings of the Productivity Commission’s Inquiry into Natural Disaster Funding Arrangements, released by the Government in May 2015. This work led to the Roundtable being recognised at the 2015 United Nations Sasakawa Awards for Disaster Risk Reduction, the first private sector organisation to be so awarded in its 30-year history.

Transformation has set us up for the future
Our work to achieve the new IAG follows the roll-out of our transformation project which created the Personal and Commercial Insurance divisions in Australia, supported by a service-based division, Enterprise Operations. We are starting to see the benefits of the new structure in the results for this year, set out in detail in the Operating Performance section of this review.

The integration of the former Wesfarmers business in Australia and New Zealand is well-advanced. The benefits of our transformation project mean we are on track to achieve our anticipated pre-tax synergy and benefit run rate of $230 million as we exit the 2016 financial year.

In New Zealand, we performed well with strong underlying results achieved while continuing to deal with the complexity of earthquake claims resolution. Finalising the 2011 earthquake claims continues to present challenges and we are working to resolve these as quickly as we can. As at 30 June 2015, we had settled 78% of all earthquake-related claims by number.

We also made progress in Asia, which we see as an important source of future growth. Our Asian footprint has continued to grow, and this year the business’ overall earnings contribution increased to $21 million.

Supporting diversity and inclusion
Embracing diversity is important to us, and has helped IAG to be successful. We continue to pursue diversity and inclusion practices, through a range of activities including our Reconciliation Action Plan and our involvement with CareerTrackers, and by encouraging employees to undertake secondments where they can use their skills to help local indigenous communities.

This year, women filled 31.5% of our senior management roles across the Group, and 33.3% in our businesses in Australia and New Zealand. While our Group result does not quite achieve the goal we set in 2010 to have 33% of senior management roles filled by women this year, it is a significant improvement from the 27% we reported in 2010 and we remain committed to further improving this ratio.

Delivering the best possible outcomes for our customers
Significant weather events affected tens of thousands of Australian customers this year. These events included the east coast low, Brisbane hail storm, Tropical Cyclone Marcia, the Sydney hail storm and storms in New Zealand. The cumulative net cost of these events to us was $1,048 million. We responded to each of these events by doing what we do best: delivering the best possible outcomes for our customers.

Deeper relationship with Berkshire Hathaway shapes our future
I am very proud of the inventive strategic relationship we established with Berkshire Hathaway in June 2015. Our traditional relationship had centred on reinsurance, but we saw an opportunity for a deeper relationship, backed by Berkshire Hathaway taking an equity stake in our company. The agreement is covered in more detail in the Chief Financial Officer’s Review.

Future focus
In the 2016 financial year, we will continue to maintain our market-leading position in Australia and New Zealand, and will focus on creating our digital future, building out our Asian footprint, and creating deeper customer insights and an agile response.

We expect our underlying profitability to remain strong in the 2016 financial year, with relatively flat GWP and a reported insurance margin in the range of 14 – 16%.1

Our focus is clearly on the future, and on ensuring our company continues to benefit all of our stakeholders.

I would like to thank the Board and my Executive Team for providing the support and guidance that contributed to our significant achievements this year.

I also thank all our people for their focus and dedication during a year of considerable challenge – both internally, through our transformation and integration programs, and externally, in the face of many significant natural peril events. Their efforts demonstrate how we operate at our best.