Insurer IAG is starting a major cost cut with plans to close all its AMI insurance outlets across New Zealand. IAG announced on Tuesday that it would review aspects of its direct distribution model, which would see 53 AMI insurance stores close across NZ, along with one its one remaining State store in Christchurch.
Australia’s biggest general insurer, IAG has warned that it has “limited scope” to pay its final dividend in September after seeing $280 million in investment income evaporate so far in 2019-20, especially since February in the sell-off on global markets driven by the COVID-19 pandemic.
QBE was another to withdrew guidance yesterday, citing “extraordinarily difficult times for all stakeholders”. However, IAG shares surged more than 10% after the country’s biggest general insurer left its 2019-20 guidance in place.
The company will sell its 26% interest in the joint venture with State Bank of India. Total consideration is over $640m with an expected increase in Insurance Australia Group's regulatory capital position of over $400m once the transaction completes.
IAG will sell its interests in Thailand, Indonesia and Vietnam. Credit Suisse suspects the sale price for the loss-making Vietnam operations was probably minimal, given it was undisclosed, while the sale price for the total Thai and Indonesian Holdings was $525m.
The company’s investor briefing signalled confidence to UBS. The broker believes, while potentially disruptive challenges were acknowledged, the strength of the brand and margin tailwinds allow the business to conduct the necessary fixes to legacy systems and prepare for change.