IAG hires new digital head, ahead of profit announcement

Insurance Australia Group has hired a News Corp executive to become its new chief of digital. This appointment comes ahead of the general insurer’s annual profit release in August.

IAG is expected to post a net profit which is expected to be about $987.4 billion, after reporting first half earnings of $571 million.

Mark Drasutis will lead the general insurer's digital labs division and help IAG “build an organisation that is customer-led and data-driven across IAG and its brands", IAG insurer said.

Prior to his stint at Rupert Murdoch’s News Corp, he spent several years in product roles at Yahoo and AOL in the UK.

“Digital is now central to insurance services and sets new levels of customer expectations for IAG and its brands to make peoples’ lives safer,” Drasutis said in a statement.

“This opportunity to combine the great teams, data, platforms and technologies at IAG was one I couldn’t miss. I am looking forward to helping set the course for customer-focused growth across all the IAG brands, now and for the future.”

Drasutis’ hiring follows former New York’s Saatchi and Saatchi chief Brent Smart’s appointment in February 2017 as marketing head within the Customer Labs division.

Smart now leads brand portfolio management, marketing strategy and creative for IAG and its brands.

In more good news, IAG and indeed its rival Suncorp Group have significantly outperformed the market this year on the back of an improving pricing cycle.

For the year to date, IAG share price rose 15 per cent and Suncorp Group’s share price increased by 11 per cent.

Yet, over this period, the ASX200 managed to put on just 4 per cent.

According to Morgan Stanley’s insurance analyst Daniel Toohey the quality differences between the two general insurers have been largely ignored, with both stocks trading broadly in sync for 2017.

Rising stocks

However, in his opinion, the upcoming results will be an important catalyst which will likely drives a divergence in stock performance.  

As far as he can tell, Suncorp - which is due to post it full year earnings on August 3 - is fully priced as all the reserve release expectations are already in the price.

Analysts are expecting the Queensland bancassurance firm to post net earnings of $1.1 billion.

“Fixing the CAT budget, business mix and compulsory third-party insurance headwinds dampened the underlying margin outlook, “Toohey said.

As he sees it, investors expecting an upgrade cycle risk being disappointed: – the Bank growth outlook is tough, with loan losses at cyclical lows.

“The Life business’ embedded value is overstated, with the market remaining challenging.”  

Embedded value is the is the present value of future profits plus adjusted net asset value.

On the other hand, IAG’ business mix, more conservative CAT budget setting pricing momentum and $250 million cost out program appeals to Toohey.

“License consolidation also creates near term optionality of capital returns. And with the aggregate reinsurance capping 2018 first half losses at $20 million per event, 2018 should be a strong year, positioning IAG for another buy-back. “

Further, Toohey argued he would not be surprised if IAG were to come up with another quota share deal, further boosting the return-on-equity and driving more capital initiatives.

IAG’s deal with Warren Buffett’s Berkshire Hathaway essentially means that Berkshire Hathaway gets 20 per cent of IAG’s gross written premiums and pays 20 per cent of claims.

The arrangement which started in 2015 was designed to help IAG to ride out volatility.

 

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