IAG focuses on financial services despite profit slump

NRMAparent Insurance Australia Group (IAG) has pumped $12 million into its financial services division during the 2001-02 financial year but has experienced a net loss of $25 million across all business divisions.

IAG chief financial officer George Venardos says the group has spent $12 million during 2001-02 in repositioning its financial services division, with a view to boosting its chances of profitability.

“We expect that [division] to return to profit at around $20 million,” Venardos says.

Early this year, IAG launched a new financial planning arm with 25 advisers, Clearview Retirement Solutions, focused on the middle Australia retiree market. In February, NRMA Financial Management said it believed Clearview could help raise funds under management to above $2 billion in two years.

But for the last financial year, IAG has posted a return that lags behind the previous year’s result by $147 million. The group’s loss of $25 million contrasts starkly to their profit of $122 million in the 2000-01 year.

Chief executive Michael Hawker says the result was dragged down by a $98 million pre-tax loss on IAG’s investment returns because of volatile markets. But whereas IAG suffered in its wealth management divisions, Hawker says its insurance arms had a successful year.

“Despite unusually severe insurance catastrophes in the first six months and the worst performance from investment markets since the 1987 stockmarket crash, our underlying insurance business delivered an excellent result,” Hawker says.

NRMA Insurance made a 32 per cent profit rise to $278 million, compared to $210 million in the previous year. Likewise, its underwriting business turned around from a loss of $22 million in 2000-01, to a profit of $142 million in the year just ended.