Float Guts Motorist Body

Sydney Morning Herald

Monday December 13, 1999

By ANNE LAMPE

The comprehensive restructure of the NRMA group ahead of its demutualisation and the float of NRMA Insurance Ltd next year has left the road service group a mere shell, owning only its travel advisory business, the Open Road magazine, NRMA Holdings and the staff super fund.

In the past year, the road service arm has lost its 49.9 per cent interest in NRMA Life Ltd, a 49.9 per cent stake in NRMA Finance Ltd, a 51.1 per cent holding in NRMA Sales & Service Pty Ltd and its 49.9 per cent interest in NRMA Information Service Pty. These half interests have been absorbed into NRMA Insurance Ltd.

The NRMA board voted to float the subsidiary-rich insurance arm last February. Before losing its stake in the companies, NRMA Ltd shared in half their profits in its own right.

In the explanatory memorandum now being vetted by the Australian Securities and Investments Commission, which will subsequently be put to the Supreme Court and then to NRMA members, the half interests in these companies have been wholly absorbed into the proposed float vehicle.

The profit flow from finance, sales and service, life and information services now 100 per cent owned by the proposed float vehicle will go entirely to the float shareholders.

NRMA Ltd will receive a 10 per cent shareholding in the floated insurance group, which it will then be forced to sell down to 2 per cent to reduce its influence.

The 10 per cent share, based on the latest forecast market capitalisation of NRMA Insurance of between $3.6 billion and $4.1billion, would be worth $360 million to $400 million.

NRMA Ltd, in the last financial year to June 30, made an operating loss after tax of $3.77million, compared with a profit in 1998 of $315,000.

The 1999 NRMA annual report says simply that during the financial year NRMA Ltd divested its interests in NRMA Life, NRMA Finance and NRMA Sales & Service at market value. No value is given in the accounts.

The insurance group will issue 1.45 billion shares, estimated by two accounting firms to be worth between $2.18 and $2.73 apiece, when floated considerably less than the $3.46 a share estimate by Maquarie Equities, based on a $5billion valuation for the insurance group last July.

NRMA members are expected to receive between $401 and $4,240 worth of shares in the float, depending on length of membership and number of policies held.

Association members will get 174 shares plus 10 shares for each year of membership.

Policyholders without motoring membership will get 314 shares plus 113 shares per additional policy.

A letter to NRMA directors by Mr Brian Camilleri, lawyer for Mr Richard Talbot, an NRMA director who is opposed to the float, says: ``There has been a sustained program to enrich the insurance company at the expense of the association by affecting the transfer of the sale of the 50 per cent interest of NRMA Ltd ... to NRMA Insurance Ltd for inadequate consideration.

``The same concerns arise in respect of NRMA Finance Ltd."

The letter also criticises the transfer of goodwill attached to the brand name NRMA to the exclusive use in the insurance arena. Under the float proposal the road service group will be permanently restrained from forming another insurance company.

© 1999 Sydney Morning Herald

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