IAG grows its NZ business

After getting its fingers burnt in the UK, IAG cautiously looks overseas again

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published April 5, 2012 5:00 pm AEST

What: Insurance Australia Group Limited (ASX: IAG) has today announced that it had completed the acquisition of New Zealand's AMI insurance business at a cost of NZ$380m. This follows receipt from the Reserve Bank of New Zealand of the final regulatory approval required to proceed with the transaction.

So what: AMI writes approximately NZ$360m of annual premium and the acquisition will increase the Group's New Zealand premium base by nearly 30 per cent, and entrench IAG's position as New Zealand's leading general insurer. The transaction is expected to generate at least NZ$30m per annum in synergies within two years, according to management.

This follows IAG's strategy of growing its market share within the local region, rather than expansion internationally, following the group's disastrous foray into the UK market in 2007, which resulted in write-downs of $350m in 2008.

Now what: While IAG has a stable chock full of brands, such as NRMA Insurance, CGU and SGIO; and financial performance has been improving, at current prices QBE Insurance Limited (ASX: QBE) appears to be the better pick.

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Motley Fool contributor Mike King owns shares in QBE. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy.

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