Insurer caps off bad year

Insurance Australia Group (IAG) capped off an acrimonious year yesterday with the announcement that its chairman of seven years, James Strong, would most likely step down from the board during the next three years.

The announcement followed a drop in earnings for the insurer for the third successive year, the resignation of its chief executive, Michael Hawker, in May, the retirement in August of two board members, staff redundancies, an exit from its venture into the UK market, and a failed bid by rival insurer QBE.

Speaking at the company’s annual general meeting yesterday, IAG managing director and chief executive officer Michael Wilkins reported that the company registered a net loss after tax for the 2008 financial year of $261 million.

As a result, the board declared a final dividend of 9 cents per ordinary share, taking the full year dividend to 22.5 cents per share fully franked. This represents a reduction of 7 cents per share from the previous year.

Wilkins said with the implementation of some key initiatives, such as cost savings measures including staff redundancies, a new management structure, and the sale of some parts of the business, such as the mass market distribution businesses in the UK, the company would be in a better position to deliver an improved insurance profit margin of over 10 per cent in 2009.

Strong confirmed his re-election to the board would be his last as a director, with the board already addressing the need for an “orderly succession” for a new chairman.