Promina Turns In $505m Year

Sydney Morning Herald

Wednesday March 1, 2006

Jessica Irvine

ONE of Australia's largest insurers, Promina Group, has delivered a record full-year profit, triggering a share price rise that puts it further out of reach as a takeover target in the industry shake-up it sees as inevitable.

The company behind AAMI and Australian Pensioners Insurance Agency yesterday announced a 9.8 per cent rise in full year profit to $505 million for 2005.

Promina announced a capital management initiative to return at least $200 million to shareholders in the first half, in a form to be decided over the next month or so. In an industry of shrinking margins, Promina reported a 1.2 percentage point increase in its insurance margin to 11.6 per cent.

The company surprised shareholders with a special dividend of 5c, fully franked, in addition to a final dividend of 13c. Its shares jumped 18c, or 3.4 per cent, to $5.45 on the news, in the process making it more expensive for any potential predator.

Promina is the last of Australia's big insurers to report.

The chief executive, Mike Wilkins, said another merger or acquisition among the intensely competitive industry's top rivals was likely.

"I think there's going to be some further consolidation down the track. It just makes economic sense," Mr Wilkins said.

QBE Insurance and Suncorp are hotly tipped as predators in any activity, with Promina and IAG earmarked as prey.

But Promina's strong result and share price rise are likely to keep the spotlight on IAG, which reported a 1 per cent fall in first-half net profit to $461 million last Friday.

An analyst with Credit Suisse, Arjan van Veen, said Promina's strength was in its growing market share in personal lines, which was unlikely to slow in the near future.

"Whilst we don't see any near-term consolidation, the market recognising they're doing well - through share price reaction - should in theory protect them a little from a takeover," Mr van Veen said.

Mr Wilkins declined to comment on whether the strong result made Promina more or less of a target. "We don't worry too much about all of that. If people want to buy us they can go into the stockmarket and buy our shares any day of the week."

Mr Wilkins said Promina's strength in the second half was driven by its direct-to-the-public brands, particularly AAMI, which had attracted 10,000 new customers a week.

Total gross written premiums rose by 6.8 per cent over the year to $3.29 billion, with the company promising an above-market growth of 5 per cent over the next three years.

The company also announced the resignation of Michael Good, chief executive of Promina-owned fund manager Tyndall. The former chief executive of HSBC Asset Management, Barry Sheehan, will take his place.

© 2006 Sydney Morning Herald

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