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SYDNEY - Insurance Australia Group Ltd (IAG) boss Michael Hawker says the company welcomes the competition the proposed A$8 billion ($9.04 billion) merger between rivals Promina Group Ltd and Suncorp Metway will bring.
"We've got ourselves in a very competitive position, which we've spent the last year organising," Mr Hawker told Sky News Business today.
"So we're looking forward to making sure that we provide a wonderful opportunity for our customers to do business with us."
He said IAG, Australia's biggest home and motor insurer, would probably lead Suncorp in most classes of insurance except CTP.
"So it basically means we'll have two large competitors, with a lot of smaller competitors who are very competitive," he said.
He said he was not disappointed the competition watchdog, the Australian Competition and Consumer Commission (ACCC), had allowed the merger.
Mr Hawker said the decision demonstrated the very competitive nature of the Australian insurance sector, and that IAG could probably make more so-called bolt-on acquisitions, not ruling out buying any cast-offs from the Suncorp-Promina tie-up.
He said the breadth of IAG's strategy meant it now had the opportunity to carry out bolt-on transactions in Australia, Asia and the United Kingdom.
"We've now got three arenas where we can make acquisitive purchases," Mr Hawker said.
IAG has spent A$1.75 billion acquiring British insurers Equity Insurance Group, Hastings Insurance Services and Advantage Insurance, in the first half of this financial year.
Mr Hawker said the company, which last week reported a 25.2 per cent decline in first half net profit, had a portfolio of acquisition opportunities, the challenge of which was to make them make sense economically.
The Sydney-based company pinned its first half profit decline on a A$179 million reduction in earnings from its investment portfolio.
Otherwise, IAG said its business was performing well with gross written premium (GWP) for the half up 3.6 per cent to A$3.32 billion.
Mr Hawker said while margins and pricing in personal lines of insurance were reasonably stable, irrational pricing was taking place in commercial lines, resulting in margin pressure.
He attributed the situation to the arrival of new entrants in the market, which he said were writing new short-term business that was uneconomical.
- AAP
