Takeover rumours push Promina up

SYDNEY - Shares of Promina Group, Australia's second-largest vehicle and home insurer, had their biggest rise in three years amid speculation Suncorp-Metway may make a takeover bid.

Promina shares jumped 8.7 per cent to A$6.82 yesterday afternoon, lifting the Sydney company's market value to A$6.82 billion ($7.7 billion). Promina closed up A38c at A$6.48.

A takeover would be the biggest deal in the financial services industry since Commonwealth Bank of Australia bought Colonial for A$9.64 billion in 2000.

"The strongest rumour is that Promina is going to go and that Suncorp is the buyer," said Karl Sieg-ling, at Cadence Capital in Sydney.

Suncorp chief executive John Mulcahy last month said he had hired Citigroup to monitor potential mergers and acquisitions among Australia's non-life insurers.

Buying Promina would give him the nation's fastest-growing insurer of homes and cars for individuals, which has been winning market share from Insurance Australia Group.

Malcolm Barter, a spokesman for Brisbane-based Suncorp, the nation's third-biggest car and home insurer and sixth-biggest bank, said the company did not comment on speculation. Promina spokesman Alexander Drake also declined to comment.

Suncorp's Mulcahy last month predicted consolidation in the insurance industry.

Shares of Insurance Australia Group, the biggest car and home insurer, climbed A14c to A$5.60.

"Often where there is smoke, there's fire," said Mark Daniels, at Aberdeen Asset Management. "It would give Suncorp a bit more scale."

Promina's first-half net income fell 5.7 per cent to A$216 million as competition cut prices for some policies and a cyclone increased claims.

Still, Promina won market share from Insurance Australia with sales of insurance to individuals rising 12.4 per cent to A$978 million in the half.

Suncorp's earnings in its second half ended June 30 rose 5 per cent to A$462 million. Banking profit increased as Suncorp lifted lending by 11 per cent to A$38.8 billion in the full year.

- BLOOMBERG