IAG Chief Resigns

Submitted by Craig Strzelecki on 27 May, 2008 - 12:58

Michael Hawker, Chief Executive officer of Insurance Australia Group (IAG), resigned today in wake of losing investors’ confidence. The company had rejected an A$8.7 billion takeover bid earlier this month by QBE Insurance Group. His resignation was effective immediately and was replaced by the Chief Operating Officer, Michael Wilkins, said the company statement. IAG chairman, James Strong, fully supported the appointment of Wilkins as immediate replacement to Hawker.

According to Hawker, "IAG is a tremendous organisation which I am proud to have led for the past seven years. I believe we are currently undervalued and our underlying performance is improving, however, I also believe I have lost the confidence of a number of our shareholders which is not tenable for the company. Given ultimate accountability sits with me, I have offered my resignation to the board."

Hawker had left Westpac Banking Corp in 2001 to become the Chief Executive Officer at Insurance Australia. Wilkins, on the other hand, had led rival insurance group Promina before it was snapped up by Suncorp. IAG had experienced a surge in claims lately due to big storms in Australia and New Zealand. Although Hawker lost his shareholders’ confidence, however, he maintained his opinion that the company is currently undervalued and shall perform well in coming times. It spurned QBE’s takeover bid last month stating that the rival company was taking advantage of weak share prices and erstwhile company position due to soft insurance market.

IAG did not reveal any further details and stated that A$4.60 offered by QBE as its share price was skinny takeover premium. It also stated that the merger did not do proper justice to shareholders of IAG. The synergies for shareholders on both the sides had to be substantial and agreed upon before the merger took place.
QBE is Sydney based provider of property and casualty insurance in Australia. It finally scrapped its hostile bid on May 21 earlier this month to make country’s biggest insurance take over. QBE had approached IAG twice by raising its offer each time but had been rejected each time. QBE stated that it shall be more attentive to expand its business and seek new acquisitions in Europe, Asia and Australia.

The IAG shares tumbled earlier to its five year low of A$2.38 at the stock market. However, they had regained subsequently and they closed unchanged at A$3.98 on the previous working day. QBE shares were down by 1.7 percent to close at $25.06. IAG share prices are still 13 percent lower than QBEs stock and cash offer.