QBE ghost lurks as Wilkins tries to salvage IAG
The ghost of the QBE takeover proposal will haunt the IAG board even though IAG’s new boss, Mike Wilkins, has laid out a thorough plan to turn around the ailing insurance company.
Had the board not had the luxury of turnaround maestro Wilkins already on its payroll, chairman James Strong and his fellow directors could have been forced to negotiate with QBE boss Frank O’Halloran. You might say they can thank Wilkins for their jobs.
Despite yet another earnings revision, IAG shares conceded only 5￠ in the wake of Wilkins’ big strategy outing. It got the tick. He has taken the long handle to IAG’s strategy, its balance sheet, its employees and its sacred dividend. His most radical move, though, is dumping the business model in favour of a suite of autonomous businesses.
He was lucky. He had the insurance cycle on his side, from bottom to top. Nonetheless, this success at Promina lent him a credibility with the market enjoyed by few other executives. Before that, he had resuscitated Tyndall Life, so this, IAG, is his third turnaround.
Hence the licence afforded him by the board to bring such dramatic changes. It will be a huge task, an immense and ambitious corporate upheaval, to splice and dice IAG into disparate business units that compete for capital.
In essence it is the opposite of the centralised bancassurance model that Suncorp champions. The argument for centralisation is synergy, the elimination of costs. The argument for decentralisation is competition.
It is hard to avoid the sneaking suspicion that Wilkins’ plan is to sell his story, gain the market’s confidence then hit them up with a capital raising. He needs more capital, particularly if he wants to proceed with the new, slimmed-down Asian expansion strategy.
Tags: business, businesses, dividend, insurance, insurance company, jobs
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