Insurance Giant IAG lays off hundreds amid record profits - Here's which teams are hit the hardest

ASX-listed insurance giant Insurance Australia Group (IAG) is facing a wave of job cuts despite its recent financial success. The company, valued at $17.3 billion, has announced plans to cut 214 jobs from its Direct Insurance Australia and Intermediated Insurance Australia divisions, which include roles in digital business support, direct claims, distribution, and underwriting. This news comes in the wake of IAG’s strong financial performance for the 2024 financial year, prompting criticism from employees and unions.

IAG’s decision to reduce its workforce has sparked outrage, especially from the Finance Sector Union (FSU). Julia Angrisano, FSU’s national secretary, has been vocal in her criticism, accusing IAG of prioritizing profits over its loyal employees.

"There is no business need for these cuts," said Angrisano. "The IAG Board has chosen to put profits ahead of their workers and in doing so, they are disrespecting loyal IAG staff who have stuck by the insurer during tough times."

She highlighted the dedication of employees who supported the company through challenges such as the COVID-19 pandemic and the aftermath of natural disasters. Workers often put in extra hours to ensure the company's success, only to face job cuts after contributing to IAG’s financial growth.

"It is disgraceful to reward loyalty by cutting jobs," Angrisano added.

A profitable year for IAG

The timing of these layoffs is particularly controversial, given that IAG has reported significant profits for the financial year ending in August 2024. The company’s full-year net profit reached $898 million, a 7.9% increase from the previous year. Additionally, insurance profits surged to $1.43 billion, marking a staggering 79.1% rise year-over-year. These financial results, according to CEO Nick Hawkins, were the product of operational improvements that bolstered the company’s performance.

"The trust our customers have in our brands is reflected in continued high customer advocacy and retention in our retail businesses in Australia and New Zealand," said Hawkins in the company's annual report. He attributed the strong performance to strategic initiatives that streamlined IAG’s business operations and improved its resilience.

Hawkins also underscored IAG’s efforts to simplify its Australian business by launching a national branding strategy and rolling out NRMA Insurance beyond Victoria. These measures, he claimed, have put the company in a strong position to support both customers and the broader economy.

Layoffs as part of restructuring

In response to the criticism, IAG has clarified that the layoffs are part of a larger restructuring plan. A company spokesperson stated that the job cuts stem from organizational changes made earlier in 2024. Specifically, the merging of the Customer Growth and Distribution business units in March and the integration of the Partners and Platforms team into the Retail Insurance Australia division in August necessitated the realignment of teams.

"The proposed changes are designed to align teams under the new structure to ensure we have the most effective processes for our business to serve and support our customers," the spokesperson said. They also emphasized that no frontline customer claims roles would be affected by the job cuts.

While IAG acknowledged that any organizational change can be difficult for employees, the company said it is committed to supporting its workforce through the consultation process and exploring redeployment opportunities.

Despite IAG’s assurances, the FSU is calling on the company’s board to reconsider the decision. Angrisano urged the leadership to think about the impact these cuts will have on affected workers and their families, who are now facing an uncertain future.

"Last month, CEO Nick Hawkins praised the hard work of IAG staff for the company’s strong results. How is showing staff the door an appropriate way to repay their loyalty and their contribution to the profitability of the business?" Angrisano questioned.

The FSU has called for greater consideration of the long-term effects of these layoffs on employee morale and the overall corporate culture at IAG. With 14,000 employees across various brands, including NRMA, CGU, and Swann Insurance, the union fears the cuts could send a negative signal to the remaining workforce.

A booming market

Despite the layoffs, IAG remains in a strong financial position. The company’s stock has surged by 32% year-to-date, now sitting at $7.33 per share. This growth reflects investor confidence in IAG’s strategy and its ability to continue delivering strong results, even as the broader economy faces headwinds.

The company’s success is underpinned by its dominant presence in the insurance market, with brands like NRMA, CGU, and Swann Insurance commanding significant market share. IAG’s ability to navigate challenges like the rise of AI, shifting consumer demands, and natural disasters has positioned it as a leader in the sector.

Balancing profitability and people

As IAG continues to navigate its future, the tension between profitability and workforce management will remain a critical issue. On one hand, the company has shown its ability to deliver impressive financial results, but on the other, its decision to cut jobs has raised questions about its commitment to its employees.

The FSU’s criticism highlights a broader concern in the corporate world about the treatment of workers during times of transition. As companies face increasing pressure to streamline operations and remain competitive, they must also balance the needs of their workforce to maintain a positive and productive corporate culture.

For IAG, the challenge will be maintaining its strong market position while addressing the concerns of its employees and ensuring that its restructuring efforts do not erode the trust and loyalty of its workforce. Only time will tell if the company can successfully navigate this delicate balancing act.