Australian insurer wins State with deadline bid of $405m

By RICHARD BRADDELL insurance writer

Australian insurer NRMA has taken control of New Zealand's largest personal insurer, State Insurance.

It outbid Royal & SunAlliance to pay $405 million in the final moment of a three-month sale process.

State was put up for tender by its British owner, CGNU, last October after CGNU found itself the owner of New Zealand's two largest insurers - New Zealand Insurance and State - following the UK merger of CGNU and Norwich.

With NZI focused on business and corporate markets and State the leader in personal insurance, it was decided that more value could be released by selling State rather than integrating it into NZI.

While NRMA's general manager for human resources, David Smith, was flying to New Zealand to take charge as State's new chief executive, NRMA appeared to have jumped the gun in announcing its acquisition.

State representatives who had been the voice of CGNU when it announced the tender in October were caught uninformed, initially referring inquiries to Australian reports of the announcement by NRMA.

Last night, Mr Smith said NRMA wanted to secure the deal quickly after a very competitive bidding process.

It was also aware of the need to satisfy the Australian Stock Exchange's disclosure requirements.

Cash-rich NRMA has also gone part-way to meeting expectations of Australian investors, who have been waiting for the former mutual to make acquisitions or return some of its $A2 billion in capital to shareholders.

The $405 million paid by NRMA was at the top end of estimates at the time State was put up for sale.

Mr Smith said the price met the group's valuation criteria while adding 700,000 new policies to the 4.5 million it had in Australia.

NRMA expects to unlock $10 million through streamlining its Australian and New Zealand operations.

Mr Smith declined to say how that would be achieved, although he said he would discuss it with State management in coming weeks.

NRMA will have to work hard, given State's $27.3 million net profit in the last reported financial year and its dull performance since it was sold by the Government to Norwich in 1990.

Royal & SunAlliance New Zealand chief executive Alan Bradley was disappointed to have missed out, given that State fitted strategically with RSA's New Zealand insurance business.

However, he questioned the price paid.

"Frankly, we would struggle to make it work for us with all the synergies we could build in from having an operation here at the price that appears to have been paid." Mr Bradley said.