INSURANCE Australia Group investors have been left in the dark over why the NRMA motoring arm has offloaded millions of IAG shares, although the two companies yesterday attempted to play down suggestions of a rift.
Talks between IAG and the board of NRMA took place on Tuesday night as BusinessDay revealed simmering frustration inside the motoring arm over links between the two that have culminated in NRMA selling some 13 million shares in IAG in recent months.
The shares yesterday lost as much as 13?, or 3.8 per cent, in early trade but finished 2? lower at $3.38.
IAG did not issue a statement to the stock exchange. The two companies instead opted to issue a joint statement to the media.
"Insurance Australia Group and NRMA Motoring & Services are both committed to the positive and mutually beneficial business relationship between the two organisations," it said.
The statement said there was a "strong alignment of interests" between IAG and NRMA motoring arm. It also noted there was significant overlap between membership of the NRMA Motoring group, customers of Insurance Australia Group and IAG's shareholders.
Source close to the NRMA board told BusinessDay it was rare for directors of the two companies to meet. But this assertion was challenged by both companies.
"The board and management teams of IAG and NRMA meet regularly to discuss mutual business interests and remain committed to an ongoing close relationship between the two organisations," the statement said.
Spokesman for both companies have declined to quantify how often the boards meet.
A spokesman for NRMA declined to discuss the share sale. "We don't talk about changes in our investment portfolio," he said.
The NRMA and IAG have denied there was a conflict but failed to explain what drove the NRMA to sell the shares in breach of an important business agreement. The NRMA is prohibited from selling below 29.3 million shares, or 2 per cent, as part of the demutualisation agreement signed in 2000. The NRMA is also prohibited from offering its own financial service products or entering into insurance.
Richard Talbot, a former NRMA director best known for his legal attempt to block the spinoff of the insurance arm, yesterday reiterated his call for the two organisations to part ways.
"It has always been my belief that the terms of the demutualisation were unfair and heavily loaded to IAG," Mr Talbot said.
IAG was spun out of NRMA in 2000. Since then the two boards have have their ups and downs, but the sale of shares by NRMA in the past year has taken tensions to new levels.
Frequently Asked Questions about this Article…
What happened between NRMA Motoring & Services and Insurance Australia Group (IAG)?
NRMA’s motoring arm sold about 13 million IAG shares in recent months, prompting concern among IAG investors. The two companies held talks and issued a joint media statement saying they remain committed to a positive, mutually beneficial relationship and have a strong alignment of interests.
How did IAG shares react to NRMA’s sale of IAG shares?
IAG shares fell in response to the news — sliding as much as about 3.8% in early trade and finishing around 2% lower at $3.38 on the day mentioned in the article.
Did IAG or NRMA explain why NRMA sold millions of IAG shares?
No. Neither company provided a detailed explanation. IAG did not issue an ASX statement, and NRMA’s spokesman said the organisation does not discuss changes in its investment portfolio.
Are there contractual limits on NRMA’s ability to sell IAG shares under the demutualisation agreement?
Yes. The demutualisation agreement signed in 2000 restricts NRMA from selling below 29.3 million IAG shares (about 2%) and also prohibits NRMA from offering its own financial services products or entering into insurance.
Do NRMA and IAG deny there is a conflict between the two organisations?
Both NRMA and IAG have denied there is a conflict and emphasized their ongoing close relationship. However, the companies did not explain what prompted NRMA’s share sales, which some see as a breach of an important business agreement.
How often do the NRMA and IAG boards meet to discuss their relationship?
The frequency is unclear. A source close to the NRMA board told BusinessDay it was rare for directors of the two companies to meet, but both NRMA and IAG challenged that and said their board and management teams meet regularly. Spokesmen for both declined to quantify how often they meet.
Who has publicly raised concerns about the NRMA–IAG relationship and what did they say?
Richard Talbot, a former NRMA director, has publicly called for the two organisations to part ways. He reiterated his view that the demutualisation terms were unfair and heavily loaded in favour of IAG.
What should everyday investors watch regarding the NRMA share sale and IAG shares?
Investors should watch official communications from IAG and NRMA (including any ASX announcements), ongoing share-price movements, and any developments about contractual or regulatory obligations stemming from the demutualisation agreement. The joint statement and any further disclosures will be important for assessing potential impacts on shareholders.
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