Insurance Australia Group's shares fell this morning as the investment community grappled with the implications of motoring body NRMA selling down its shareholding in IAG without consultation.
The two boards met last night to discuss the share sale along with other matters, including the almost $10 million a year that NRMA pays to IAG for shop front, IT and other distribution functions. It undoubtedly also discussed the story which appeared in BusinessDay today.
The NRMA and IAG have denied there is a conflict but failed to explain what drove the NRMA to sell the shares and therefore breach an important part of a complex set of business relationship agreements.
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IAG has not yet put out a statement to the ASX, but the two companies released a joint statement to the media late this morning to say they remain committed to a close ongoing relationship.
"Contrary to allegations made by unnamed sources in the media today, both organisations enjoy a positive relationship and at no time have conducted crisis talks of any nature," the statement read.
On Wednesday, Fairfax newspapers reported that 13 million IAG shares owned by NRMA had been sold for about $45m.
The NRMA provides large amounts of business to IAG through its 2.3 million members but it was suggested that senior ranks within the motoring organisation were contemplating a split after becoming frustrated with the small financial gain it ekes from its links with the insurer.
IAG and NRMA released a joint statement rejecting the rumours and any possibility of a split and declaring the relationship in good order.
NRMA later added that the decision to sell down its holding in IAG shares was based on financial advice.
"It's a relationship that has to work and although there is friction from time to time it works itself out," said one institutional investor. "This looks more like it's a case of ex-directors making noise because they have an axe to grind."
Analysts said it was unlikely a split would occur as it would require alterations to NRMA's and IAG's demutualisation agreement, which prohibits either company from providing duplicate products in Australia and New Zealand.
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