But chief executive confirms some roles will go

Ichan and AIG

AIG’s $1.6bn cost-cutting exercise “won’t have a dramatic effect” on its Australian operations, according to the country’s chief executive Noel Condon.

But he admitted there is uncertainty for the insurer and that some roles would go over the next two years.

In January, AIG chief executive Peter Hancock announced that the insurer would slash $1.6bn in costs and return $25bn to shareholders by 2017.

“Inevitably when a global insurance company decides to cut $1.6bn off our expense base it is going to mean that some people will be leaving the business,” Condon told StrategicRISK. “We will undoubtedly shrink our headcount, but it won’t be dramatic.”

Condon said he had been focusing on improving AIG Australia’s expense ratio since he came into the role in 2010. Anything lower than 30% is considered to be a healthy expense ratio.

“Now we’re operating at [an expense ratio of] 28/29%. I’d prefer to be 26/27. We’ll get it there. But we’ll get it there by growing our net premium, not by cutting expenses dramatically,” he said.

Last year the insurer grew net premium by 9.6% in Australia and Condon said he is targeting 8% in 2016.

“I’m confident that we’ll hit that number. But it’s more important that we deliver return on capital deployed and risk adjusted profit,” he said.

AIG Australia has 359 employees across offices in Perth, Brisbane, Melbourne, Sydney and Kuala Lumpur. Condon said he has travelled to each site since the group announcement to address staff concerns about the expense cuts.

“I talked to everybody that I could reach and laid out the metrics in our business. The Australian business stacks up really well versus all of the other countries in Asia-Pacific; it’s a top five performer on every metric. So why would the global organisation slash and burn into head count in Australia when the metrics are so strong?”

Clients and brokers have also raised concerns.

“Clients want to understand what the changes are going to mean in terms of things like ‘will AIG’s balance sheet have the necessary grunt in the future to soak up the risks that they bring to us, will we still have the same underwriting appetite?’” he said. 

“Clients will vote with their feet if they’re uncomfortable – they’ll be de-risking – but there’s absolutely no signs of that at this point.”