Michael Hawker struck a defiant note while acknowledging he had lost investor support

Insurance Australia Group Ltd is reviewing all its operations after accepting the resignation of its CEO of the past seven years, Michael Hawker.

His departure follows months of poor share performance, three successive profit falls, the downgrading of profit forecasts, and the collapse this month of a takeover bid by rival QBE Insurance Group Ltd.

Announcing his immediate resignation on 26 May, Hawker struck a defiant note while acknowledging he had lost investor support.

“It’s with great personal regret that I have decided to resign from my position as CEO,” he said. “IAG is a tremendous organisation that I am proud to have led for the past seven years. I believe we are currently undervalued and our underlying performance is improving.

“However, I also believe I have lost the confidence of [several] of our shareholders, which is not tenable for the company. Given ultimate accountability sits with me, I have offered my resignation to the board.”

Hawker had joined IAG in December 2001, after leaving Westpac Banking Corporation.

IAG chairman James Strong also sought to highlight the positives, describing Hawker as “an outstanding leader” who had conducted himself with the highest ethical standards.

“Under his leadership, IAG’s revenue has grown from A$2.8bn to A$6.7bn or at an annual compound growth rate of around 16%,” Strong said. Return on equity had averaged 15% a year.

“I have lost the confidence of [several] of our shareholders, which is not tenable for the company. Given ultimate accountability sits with me, I have offered my resignation to the board

Michael Hawker

Strong announced the board’s decision to engage Mike Wilkins, IAG’s chief operating officer since last November, as its new CEO. He said the decision meant “a smooth leadership transition“.

Before joining IAG, Mr Wilkins was managing director of Promina Group Ltd from August 1999 until its acquisition by Suncorp Metway Ltd in March 2007.

He has worked in the Australian insurance and financial sector for 25 years, previously serving as managing director of fund manager Tyndall Australia Ltd.

Mr Strong also announced a review “of every aspect” of IAG’s business “in Australia and overseas”. He expected to brief the market on the review‘s outcomes by early July.

The 2004-05 year was the last in which IAG reported a profit rise. Its 2005-06 net result was A$759 million, 6.4% down on the previous year.

Last August, IAG reported a A$552m profit for 2006-2007, A$200 million down on the previous year, which it blamed on a rise in claims from severe weather events in eastern Australia and the UK.

Last October, Hawker revised IAG’s 2007-08 profit forecasts downwards and in February this year blamed storm-related payouts for a “disappointing” 68% drop in profit for the half-year to December 2007, from A$345m to A$110m.

Storm-related payouts have impacted on the results of most of Australia’s general insurers, but not all have sustained profit drops. IAG’s would-be suitor, QBE, recorded a profit of A$1.925bn for calendar 2007, an increase of 30%.