State Insurance sells for A$325M

NRMA chairman, Nicholas Whitlam, says the price represents 2.1 times net assets based on State's accounts to the end of December.

"This acquisition is a key step in the company's strategy to improve shareholder returns by making an acquisition, returning surplus equity to shareholders through a share buy-back, or introducing debt or hybrid equity, or a combination of these, by June 2001."

Mr Whitlam says key features of the acquisition include further expanding the company's NRMA's geographic diversity and scale, with a strategy to ensure that the acquisition is earnings per share positive within 18 months.

State was put on the market last October by UK-based insurance company CGNU, which also owns New Zealand Insurance.

Both companies have around 19% of the New Zealand general insurance business, but CGNU decided greater shareholder value would be generated by selling State rather than integrating it with NZI.

State's new owner says it plans to retain and enhance the State Insurance brand in New Zealand, and is hoping to achieve cost savings of more than $10 million a year through efficiencies in distribution, back-office processing, reinsurance costs and administration.

An NRMA executive, David Smith, is to be appointed State Insurance CEO.

The head of NRMA Insurance, Eric Dodd, says the New Zealand insurer is a good strategic fit with the company because of its complementary products, people and culture.

"The acquisition of State provides NRMA Insurance a leading position in the New Zealand general insurance industry, greater geographical diversity and access to a further 700,000 plus customers.

"By adding the benefits of scale which come from being part of the NRMA Insurance Group, State Insurance will become an even more effective company in the future."

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