Insurer Aims To Be Loan Ranger

Sydney Morning Herald

Wednesday November 24, 1999

By ANNE LAMPE

NRMA Insurance would seek to double its $2 billion revenue base over the next four years by selling more credit card, loan and investment products to its4 million-strong customer base.

In a speech yesterday setting the way ahead for NRMA Insurance, NRMA chief executive Mr Eric Dodd set a goal of an 18 per cent pre-tax return on capital.

Mr Dodd said NRMA Insurance would list on the Australian Stock Exchange towards the middle of next year if 75 per cent of members voted for the demutualisation.

The explanatory memorandum on the demutualisation, now in draft version six, should be signed off by directors on December 9. It sets out the formula for share allocations to eligible NRMA members.

Mr Dodd stressed that the business strategy was ``in no way" contingent upon its ownership structure.

At present the financial planning arm sells to only 4.5 per cent of NRMA Insurance's customers. It expects to lift this to8 per cent by next year and eventually up to 20 per cent.

The group's IT capability is seen as central to this strategy, with the NRMA group having spent $125 million last year above normal IT expenditure to enable it to sell more product at lower prices.

Mr Dodd also announced NRMA's foot in the door in the Chinese insurance market, using a $5 million to $10 million joint venture signed last Friday with China's road service group, China Automotive Assist.

``It is a clever way to get ourselves into a country that we otherwise would have difficulty getting into," he said.

He added that NRMA was keen on international expansion and six or seven people were looking at expansion opportunities, mainly in the Asian region.

On the local front, the insurance group, the largest in Australia, is looking at financial services acquisitions, particularly retail funds management and retirement planning groups.

The fifth draft of the float memorandum puts a $3.2 billion to $4 billion valuation on the insurance group, although market estimates are about $5 billion.

The document is expected to be sent to NRMA's 1.87 million members in the first quarter of next year before being put to a member vote.

Asked why NRMA had not considered demutualising the road service operation as well as its insurance arm, Mr Dodd said that such a move would have created objections from a large number of members who wanted to keep the road service arm as a road service delivery club. The two businesses were different, with ``different ethics".

He said 95 per cent of members' calls to a hotline supported the demutualisation of the insurance group.

© 1999 Sydney Morning Herald

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