NRMA's sale of 11 million IAG shares may breach agreement

NEW South Wales motoring group NRMA has revealed the extent of the sale of its stake in Insurance Australia Group, offloading nearly 11 million shares over the past year and potentially putting it in breach of a shareholding agreement between the two firms.

The details come as NRMA, which ranks as one of the nation's biggest mutuals, reported a small drop in profit for financial 2011. The latest profit of $18 million for the year to June 30 was down from $19.3 million a year earlier. NRMA, which previously owned the insurance business, has some 2.36 million members.

The NRMA and IAG declined to discuss what drove the NRMA to sell the shares or provide details of the sale when BusinessDay first reported the transaction in June. But both insist they maintain a positive business relationship.

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While NRMA usually provides the value of its holding in IAG, its latest annual accounts provide only the value of the holding of its share in the insurer as a proportion of its total investment portfolio.

However, based on disclosures from previous years, the holding is now down to 18.4 million shares, valued at $62.3 million at the end of June, according calculations by BusinessDay.

Under a demutualisation agreement signed between the two firms 11 years ago, NRMA is prohibited from selling below 29.3 million shares. The IAG shares this year represented 11 per cent of NRMA's total investment portfolio, NRMA said. In financial 2010 the holding was valued at 19 per cent of the portfolio, the accounts said.

Excluding the IAG shares, NRMA's investment portfolio was valued at $505 million, up from $428.9 million last year, the accounts showed.