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.
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.
The developments have put on the agenda questions about how the NRMA can get a better deal from sending its customers to IAG. NRMA has 2.3 million members, many of which are insurance customers with IAG.
Under an agreement NRMA is supposed to hold 29.3 million shares but it has deliberately and systematically sold down that stake in small parcels and now holds an estimated 16 million shares. Both companies today have avoided addressing this issue.
Indeed, the number of shares sold is largely irrelevant because the business relationship agreement signed between the NRMA and IAG more than a decade ago makes it clear that NRMA must keep 2 per cent of the shareholding for the duration of the trademark agreement.
BusinessDay revealed today that NRMA and IAG held a joint board meeting last night. A source close to the board said a meeting of the two organisations at board level was not common.
Senior IAG executives have a long scheduled plan with some fund managers in Sydney tomorrow and now questions are expected to be asked about what is behind the share sale and what it means for the long term future relationship of IAG and NRMA.
aferguson@theage.com.au