IAG freezes exec pay and hikes premiums
INSURANCE Australia Group has frozen executive pay and announced plans to end insurance coverage for businesses linked to fossil fuels extraction.
The insurer, which operates brands including NRMA, RACV, CGU, SGIO, SGIC and WFI, has faced a horror run in the past few years as repeated natural disasters hit profits.
At its annual general meeting on Friday, IAG chairman David Armstrong noted despite the challenges the insurer had delivered a $347m net profit after tax for the 2022 financial year after a $427m loss the previous year. However, IAG’S $774m rebound came on the back of a $200m unwinding of provisions taken by the insurer to cover potential losses from the Covid-19 pandemic.
Mr Armstrong said on Friday the company was keen to avoid the shareholder anger that marred its 2021 AGM and saw the company’s proposed remuneration report voted down despite moves by IAG’S board to nix $6.9m in executive bonuses.
Ahead of its AGM, IAG told shareholders it would move to return another $350m in capital to shareholders through an on-market share buyback and freeze executive pay.
The buyback will be funded by an unwinding of IAG’S remaining Covid-19 business interruption insurance provisions after the High Court binned an attempt to challenge a ruling from the Federal Court.
This leaves IAG with $615m remaining in provisions for potential pandemic claims.
However, shareholders took issue with the buyback, questioning why IAG had not moved to issue a special dividend. Mr Armstrong said IAG had chosen to pursue a buyback due to a lack of franking credits.
Mr Armstrong said IAG had “reflected deeply” on the shareholder anger at the company’s 2021 results.
“We have made changes to more closely align executive remuneration outcomes with shareholder outcomes,” he said. Mr Armstrong said IAG had frozen pay awarded to executives and
fees for board members for the 2023 financial year. IAG also said it would cease insuring companies that “predominantly participate in fossil fuels extraction” including oil, gas and coal power generators. Mr Armstrong said as at June 30 2022 IAG had only $1m in premium exposure to these businesses.
“Our policy is to prohibit investments in companies involved in thermal coal mining and we are reviewing
our investments policy in relation to companies involved in the extraction of other fossil fuels,” he said.
IAG chief executive Nick Hawkins said the insurer was pleased with how many customers had been keeping their coverage despite climbing premiums. Gross written premium grew by 6 per cent in the last financial year to $13.3bn. Mr Hawkins said IAG was forecasting a further “mid-to-high single digit” lift in gross written premium in the year ahead. IAG faces a further year of wet weather, with the latest floods to hit NSW, Victoria and Tasmania adding 2000 claims.
“In response to these pressures, and in anticipation of higher reinsurance costs, we have been increasing our premiums across home, motor and our commercial insurance classes,” Mr Hawkins said.