Nrma Offers Rate Reward To Members

Sydney Morning Herald

Saturday June 17, 2000

By ANTHONY HUGHES

NRMA Insurance Group will seek to immediately increase the penetration of financial services into its membership base when it lists by offering shareholders a premium deal from its building society.

Assuming the sharemarket listing proceeds either late July or early in August, shareholders who put more than $5,000 into an NRMA building society term deposit are expected to receive a 0.15 per cent better interest rate than other customers.

Many companies have introduced shareholder benefit schemes to entice their shareholders into remaining loyal customers and NRMA is expected to follow suit. Some banks offer discounted fees on some products, while retailers such as Coles Myer offer discounts on in-store purchases.

Unless a last-minute appeal on Thursday by dissident director Mr Richard Talbot is successful, NRMA's 1.8 million members will become shareholders under the demutualisation and listing of the insurance arm.

The motoring association arm of the NRMA will remain a mutual organisation.

The appeal will have to happen quickly, as it is understood there are hurdles to reversing changes in NRMA's corporate structure once they are formally in place under the Corporations Law.

One of the key targets of NRMA chief executive Mr Eric Dodd is to increase the penetration of NRMA's financial services business, which includes the building society and the funds management operation.

Only 8 per cent of NRMA members, including those with insurance products, also buy its financial services products.

Mr Dodd hopes to continue the broadening of the company's product range started in the mid-1990s, when the NRMA moved from its NSW base into Queensland and Victoria. In 1997, the group bought the MLC Building Society and in 1998 snared SGIO in a hotly contested takeover battle.

But rather than release an exhaustive suite of new products, NRMA is eager to focus on a core range of simple products that can be sold directly to the customer without needing sophisticated financial advice. It is also expected to seek alliances to fill any holes in its product range that can be sourced externally.

The financial services arm offers a range of life insurance, superannuation, savings and banking products.

While Mr Dodd is not a fan of the so-called bancassurance model, where companies offer full service banking and insurance operations, he will have up to $600 million available to spend on acquisitions to broaden the earnings base.

Fresh broker valuations seeping into the market this week suggest that, on listing, each NRMA share will be worth around $2.75, valuing the company at $4 billion in total, but below earlier valuations of more than $5 billion.

The valuations have been drafted by brokers associated with the three joint global co-ordinators, Credit Suisse First Boston, UBS Warburg and Macquarie Bank, and co-lead managers Deutsche Bank, Salomon Smith Barney and JB Were & Son.

Some fund managers are concerned that like other insurers, NRMA's earnings will be volatile but they also believe the brand name is strong.

The outlook

* Broker valuation cut from as high as $5.1bn to around $4bn because of weaker equity markets

* Profit forecasts expected to show fall in 2000 profit but rise to 18.4c a share in first year

* Board likely to pay 40 to 70 per cent of maintainable earnings in dividends

* Monday's deemed proxy meeting final hurdle to listing apart from dissident director court appeal

© 2000 Sydney Morning Herald

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