Insurance Australia Group Ltd., the nation’s biggest car and home insurer, is studying a bid for Wesfarmers Ltd.’s insurance unit, according to three people with knowledge of the matter.
IAG is in talks with Perth-based Wesfarmers about an acquisition of its insurance business and has been studying the unit’s financial details, said the people, who asked not to be identified as the matter is private. The sale, which centers on the commercial insurance business, may fetch more than A$2 billion (US$1.81 billion), two of the people said.
Australian insurer Suncorp Group Ltd. is unlikely to pursue an offer after studying information on the business, according to the two people. The Wesfarmers insurance business, which has more than 200,000 policies, reported A$205 million [US$185.66] of earnings before interest and taxes last year.
IAG, founded in 1925, is seeking to grow its Australian and Asian operations after agreeing to sell its U.K. business last December. Wesfarmers, which owns coal mines, supermarkets, chemical producers and an investment bank, has been shifting spending to the Coles retail chain it bought in 2007 in Australia’s largest corporate takeover.
Wesfarmers ended talks with Zurich Insurance Group AG over a possible offer, the Australian Financial Review reported today in its Street Talk column, without saying where it got the information. Spokesmen for Zurich, IAG, Wesfarmers and Suncorp declined to comment.
Brisbane-based Suncorp, a lender and insurer with a market value of A$16 billion [US$14.5 billion], has been exiting commercial property loans, corporate lending, and leases that were worth A$18 billion [US$16.3 billion] in 2009 to reduce risk.
–Editors: Ben Scent, Russell Ward