IAG 1.52% $4.53 insurance australia group limited

CBA chases IAG disgruntled

  1. 1,155 Posts.
    CBA chases IAG disgruntled
    By Tim Boreham
    October 23, 2002
    A GIANT in banking but a minnow in general insurance, Commonwealth Bank plans to double its share of the latter – and is targeting customers left disgruntled by IAG's takeover of CGU.

    CommInsure boss Peter Beck said the pending merger would inevitably upset some customers.

    "With mergers, there are always people who are disenfranchised," he said.

    "We have a 5 per cent market share, and we want to double that over the next three years."

    As well, Commonwealth had some 10 million bank customers, "so we have a lot of organic opportunities".

    Insurance Australia Group's $1.8 billion takeover of Aviva division CGU unites the first and third biggest general insurers.

    CommInsure is among the top 20 insurers by size, but wants to become the third biggest operator.

    Although the merger is expected to drive up premiums, Mr Beck said the industry had already returned to a profitable position after the upheaval that followed the HIH collapse.

    With 600,000 customers, Mr Beck said, CommInsure was underweight compared with Commonwealth's dominant position in the market.

    It sells home and contents insurance, and rebranded Allianz car insurance.

    CommInsure plans a rebranding and promotion drive next year.

    Meanwhile, a slump in IAG shares has put a further damper on the company's planned retail offer. After falling 44c on Friday and 7c on Monday, IAG shares lost a further 6c to $2.38, on a big volume of 26 million shares.

    As part of its $1.04 billion raising to fund the purchase, IAG plans to offer retail investors $300 million shares at $2.55 each. Poor take-up means underwriters UBS Warburg and Deutsche Bank will be forced to buy stock, creating an overhang in the market.

    Most analysts concluded that, although the CGU business was a good fit for IAG, the price was hard to justify.

    Credit Suisse First Boston said the price was "full" considering there were no other bidders.

    Mr Beck said Commonwealth would have been keen to talk to Aviva about buying CGU.

    "If we had known it was for sale, we would have put the ruler over them," he said.

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