Nrma Mulls Sale Of Iag Shares

Sydney Morning Herald

Tuesday December 13, 2005

Lisa Murray

NRMA Motoring & Services is considering selling down its $147 million stake in Insurance Australia Group.

It is understood the selldown, which requires approval from IAG, was discussed at a board meeting last week.

NRMA's motoring services arm separated from IAG five years ago when the insurance business listed on the stock exchange. In recent months the relationship between the two groups has been strained because of the fallout from IAG's new smash repairs system, which some believe has harmed the NRMA brand.

NRMA president Alan Evans said yesterday that no decision had been made on the sale of IAG shares.

"We constantly review all of our shareholdings," he said. "There has not been a decision to sell down our IAG shareholding."

A spokeswoman for IAG said the company was committed to the relationship with NRMA and there were regular meetings between the two groups. However, she declined to comment on NRMA's potential sale of IAG shares.

NRMA owns a 1.8 per cent stake or 29.3 million shares in IAG and, under the demutualisation agreement, is required to maintain that holding. The agreement also gives IAG perpetual rights to the NRMA Insurance brand.

Mr Evans said there was some concern that the brand had been damaged by IAG's continuing battle with smash repairers over a new system, which allows preferred repairers to bid for jobs based on photographs of the damaged vehicle posted on IAG's website.

"They could have handled the whole thing better," the NRMA president said yesterday.

In October NRMA took the dramatic step of writing to its members to explain its relationship with IAG because some members had decided not to renew their memberships based on the smash repairers' complaints.

Meanwhile, shares in IAG closed up 20c yesterday at $5.02, with the 4 per cent jump triggered by upgrades from two well-regarded analysts, Macquarie's Tony Jackson and Goldman Sachs JBWere's Ryan Fisher.

In a note to clients, Mr Jackson said IAG was trading at a significant discount to his $6.10 valuation and had a dividend yield of more than 6 per cent, fully franked.

Analysts also welcomed IAG's $69 million acquisition of a 30 per cent stake in Malaysian insurer AmAssurance.

"The acquisition is consistent with IAG's strategic imperative to expand in the fast growing Asia region, now having a presence in China, Thailand, Singapore and Malaysia," Mr Jackson said.

IAG said last week it was still in discussions with potential partners in China but its Asian strategy has caused some angst among fund managers and the stock is down almost 30 per cent from its high of $6.95 in February.

© 2005 Sydney Morning Herald

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