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Takeover talks dismissed by IAG

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Insurance Australia Group has sought to hose down speculation the recent spate of natural disasters leaves Australia’s largest insurer exposed to a takeover.

Amid speculation that huge losses from the Christchurch earthquakes, the Queensland floods and other catastrophes would force a wave of consolidation through the insurance sector, IAG chief executive Michael Wilkins said yesterday the natural disasters didn’t necessarily turn companies into takeover targets.

“There are a number of factors, not just financial impacts from events, that can potentially drive that,” Mr Wilkins said following IAG’s first-half profit announcement.

“The industry in this part of the world is well capitalised and well protected through reinsurance, and will be able to cope with this event.”

Mr Wilkins’ comments came after Roger Feletto, managing director at corporate advisory firm Greenhill Caliburn, said the natural disasters would put pressure on insurance companies’ balance sheets.

“Maybe this is the year we will see QBE buy IAG,” he said in a presentation at a mergers and acquisition conference in Sydney.

IAG reported a $161 million net profit for the first half of 2010-11, down 51 per cent on the same period of the previous financial year after a surge in personal injury claims in the UK offset improved margins in its key Australian market.

Further losses at the UK operations are expected in the second half of the financial year as “claim farming” by personal injury lawyers inflates the frequency and amount of payouts.

“We remain confident this business can achieve a satisfying return over the longer term,” Mr Wilkins said of the UK operations.

IAG repeated its recently updated guidance for a full-year insurance margin in the range of 8 to 10 per cent.

Hit by floods, storms, bushfires and earthquakes, natural peril costs in the full year are forecast to be $540 million.

The board declared a fully franked interim dividend of 9c per share — up 0.5c on the first half of 2009-10 — with a record date of March 9 and a payment date of April 11.

IAG shares closed 4c or almost 1 per cent lower to $3.63.

Source : Herald Sun