Ownership changes spell end of cut-price premiums

By Nick Stride

Friday 29th August 2003

Sweeping change in the ownership of the Australasian general insurance sector has shifted the battle on to a new front.

In the last quarter of 2002 alone, three British parent companies announced their exit from the region.

Royal & SunAlliance exited using the float option, leaving Promina as one of the largest listed players. Aviva sold CGU and NZI to Insurance Australia Group (IAG), and Wesfarmers is finalising the acquisition of the Australian and New Zealand subsidiaries of Edward Lumley Holdings.

The changes, according to rating agency Standard & Poor's, leave three of the four largest New Zealand general insurers in Australian hands.

Roger Bell, chief executive of Promina's New Zealand general insurance arm, Vero, pointed out Promina could not accurately be called an Australian company. It had a dual primary listing on the New Zealand and Australian stock exchanges, substantial New Zealand ownership and significant New Zealand assets and operations.

It had as good a claim to be a truly Australasian company as any, Mr Bell said. "That is a position that we value."

The ownership changes, Mr Bell said, also signalled a change in focus for all the companies concerned.

Despite consolidation the general insurance market is as competitive as it ever was.

But ownership by locally listed companies means boards and management will need to be even more focused on shareholder returns. That will leave little room for selling policies at massively discounted premiums in an effort to capture market share, the practice that eventually brought down HIH.

The name Vero had been settled on after careful thought and research, Mr Bell said.

The company wanted a name that couldn't be shortened into an acronym such as RSA, QBE, or IAG. It also wanted a distinctive name. No other insurance company started with "V" or sounded like Vero

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