Float To Go Ahead Come Rain Or Shine, Says Chief

Sydney Morning Herald

Thursday April 20, 2000

By ANTHONY HUGHES

The NRMA is confident the planned public listing of its insurance arm will proceed no matter what sharemarket conditions are, but has vowed it will not ``overhype" the shares.

Barring further legal challenges a court hearing is set down for next month the NRMA is poised to release a prospectus next month, ahead of a listing on the Australian Stock Exchange in July.

The NRMA's chief executive, Mr Eric Dodd, said poor sharemarket conditions might actually help the listing and provide its 2 million members/shareholders with ``upside experience".

``We have a strong underlying business I think we can take to listing no matter what the conditions," he said.

Mr Dodd is eager to avoid a repeat of AMP's demutualisation and sharemarket listing in 1998, when some investors paid almost double the starting price in a frenetic day of trading only to see the share price dwindle in the ensuing days and months.

That frenetic trading was in part caused by a lack of available shares for professional investors. Professional investors, such as AMP and BT, will get at least 8 per cent of NRMA before listing, and possibly more, depending on how many NRMA shareholders take cash instead of holding shares at the listing.

But it is still estimated that demand from these institutions will be many times the estimated $1 billion worth of shares that will be on offer to them or about 20 per cent of the total number of shares issued.

Stockbrokers have valued NRMA on listing as high as $5.1 billion, or $3.42 a share, although this is based on assumptions that the NRMA will attract as good a rating as established general insurers such as QBE Insurance.

This would mean NRMA members could get an extra windfall, above the independent valuation of $2.60 to $3 range provided in the information memorandum for yesterday's meeting. ABN Amro has a more conservative value of $3.06 a share.

While the NRMA's strong brand name and a recent improvement in the prices of financial-services companies should augur well for the price, NRMA management is unknown to financial markets, and there are risks associated with any plans to spend up big on acquisitions.

NRMA has been aggressively broadening its range of financial-services products, but areas such as health insurance and reinsurance are seen as potentially risky areas to be in. Analysts would like to see NRMA expand interstate, possibly through alliances with other motoring associations.

© 2000 Sydney Morning Herald

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