Insurance Australia Group Ltd. (IAUGF.PK) said late Thursday it will cut 600 jobs over the next three years due to the implementation of a new operating model at its commercial insurance unit CGU.
Melbourne-based CGU is a provider of general insurance to Australia's regional and rural communities, a workers' compensation provider and commercial insurer. Insurance Australia acquired CGU in 2003.
Insurance Australia said the revised operating model at CGU will enable it to move to an integrated, function-based organization with common approaches to account management, underwriting and claims.
This will remove areas of duplication within the business and enable it to provide more efficient and consistent service to intermediaries and business partners, the company noted.
Insurance Australia expects the new model to generate initial pre-tax cost savings of A$25 million in financial year 2013. The company projects annual cost savings of around A$65 million pre-tax by the end of financial year 2015.
Mike Wilkins, Managing Director and CEO of IAG, said, "Since resetting its strategy in 2008, CGU's focus on remediation and rebuilding has improved its underlying performance by around $160 million on an annualised basis. With the work to improve the fundamentals of the business well progressed, we believe the time is right to accelerate the actions we are taking."
Insurance Australia said that the cost of implementing the operating model was about A$75 million pre-tax. Of this, A$35 million would be recognized in the second half of the 2012 financial year, while the balance will be incurred in the 2013 financial year.
The company will recognize these items as a corporate cost in its reported results, reflecting their one-off nature.
In Friday's trading on the Australian stock exchange, IAG.AX is trading at A$3.29, up A$0.095 or 2.97 percent on a volume of 4.19 million shares.
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