IAG Unit Acquires HBF’s Nonlife Insurance Business in Australia

HBF Health Ltd., a health fund company in western Australia, has sold its nonlife insurance business to CGU, a unit of Insurance Australia Group Ltd. for an undisclosed sum.

"The sale of HBF insurance would help ensure HBF could focus on its core health insurance business," said Rob Bransby, managing director of HBF in a statement. HBF is a nonprofit organization for health funds with 900,000 members in western Australia.

Under a distribution agreement with CGU, HBF-branded products such as home and contents, motor and travel insurance will be distributed by HBF and underwritten by CGU over the next 10 years.

"Having established HBF as a trusted local general insurer for more than 20 years, it had become clear that HBF's interests were better served as a distributor rather than manufacturer of general insurance products," said Bransby.

Western Australia's nonlife insurance sector has seen the entry of large overseas, eastern state-based and online insurers in recent years. "It's become clear to us that it will be increasingly difficult for HBF to compete effectively as a small local player against insurers who have massive advantages in terms of scale and technological infrastructure," said Bransby.

The sale of HBF insurance will have no immediate impact on its nonlife insurance policyholders. "A critical consideration was CGU's agreement to employ the great majority of HBF's general insurance team in Perth," said Bransby.

CGU has been attracted to a partnership with HBF "because of its iconic brand, loyal membership base and its alignment with CGU's values," said Peter Harmer, chief executive officer of CGU.

IAG's first-half profit dropped to A$470 million (US$496.5 million) for the first half of 2011 fiscal year ended Dec. 31, 2010, from A$488 million a year earlier; mainly due to losses from the U.K. operation and natural perils claims took their toll (BestWire, Feb. 24, 2011).

IAG plans on expanding in Australia and New Zealand and to "boost its Asian footprint so that it represents 10% of the group's gross written premium by 2016," said its managing director and CEO Mike Wilkins in a statement. He said the collective insurance margin of IAG's Australian and New Zealand businesses have increased to 17.8% in the first half of 2010, from 5.5% in the correspondent period of 2009, following the group set a performance improvement goal three years ago (BestWire, June 15, 2011).

(By Iris Lai, Hong Kong bureau manager: [email protected])