Natmut Denies Pressure To Sell Asian Operations

The Age

Friday May 28, 1999

JILL FERGUSON

National Mutual has angrily denied claims that its parent, the French insurance giant Axa, was preparing to buy out its Asian operations by forcing down the value of the business.

National Mutual's chief financial officer, Mr Tony Summers, said it was not true that Axa was pressuring NM to lower the valuation of its subsidiary Axa China Region. Any reduction would be due to changes in Hong Kong's operating environment, he said.

However, former senior NM executives have disputed the assertion, saying that market speculation regarding NM's 51per cent stakeholder Axa was fairly close to the mark.

Last Friday, NM delayed its interim profit announcement by two weeks to allow the independent actuarial adviser Trowbridge Consulting to complete an appraisal valuation of Axa China Region.

Insurance companies are judged on their appraisal values - which is comprised of evaluation of shareholders' funds and existing business and an estimate of future business.

Mr Summers said the new set of products released in Hong Kong at the start of the year - representing one-third of the appraisal value - was the catalyst for the re-evaluation.

One analyst said: ``While there are reasonable grounds for NatMut to reduce the appraisal value, it looks like they changed what they wanted to do, and brought Trowbridge in at a relatively late stage." The analyst indicated that investment earnings and the discount rate represented the biggest swing factors in an appraisal value.

Mr John Trowbridge, the chief of Trowbridge Consulting, denied any pressure and said NM had its own process to undertake after it received the valuation.

Despite NM's arguments to the contrary, it has long been speculated that Axa may be quietly exploring the option of buying out NM's 74per cent of Axa China Region - considered to be NM's jewel in the crown.

Such a purchase would be considered contrary to the spirit of the agreement Axa struck with the Federal Government when it purchased a company-saving controlling stake in NM four years ago.

In 1995 Axa promised that any Asian expansion would occur under the NM banner. Since then, Axa has won a Chinese life insurance licence under its own name, begun to rebrand NM with the Axa livery, changed the name of NM Asia to Axa China Region and consolidated a portion of NM's Asian funds management business.

``If NatMut sold the Asian business for what was perceived as less than a good price, the market would flog the stock," one trader said.

In a day when the insurance sector suffered, NM dipped just one cent to $2.53.

NM will now report its interim profit on 4 June.

© 1999 The Age

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