Second profit warning piles pressure on IAG chief executive.
IAG chief executive Michael Hawker is under renewed pressure to sell the business to QBE after issuing the company's second profit warning this year.
On Monday, IAG revised its 2008 margin forecast to between six and eight per cent, leading to a fall in its share price to A$4.21. QBE’s offer, which was last week extended until 5 May, valued the company at A$4.02 per share.
QBE’s initial bid of A$3.75 was rejected on 15 April. Despite analysts’ suggestions that the conclusion of a sale to QBE was highly likely, IAG chairman James Strong insisted: “Notwithstanding today’s announcement, the board continues to be of the view that QBE’s proposal is inadequate because of the inherent and long-term value in IAG – its brands, market penetration and unique scale.”
In February, IAG reported its half year profits had fallen by 68%.
In a statement. IAG said that the revision of its projected earnings was partly the result of exposure in the UK motor market. It said that it planned to revamp its UK products and rebalance its portfolio toward niche motor classes, while upping its saving targets from £25m to £27m.
Hawker said: “Our performance in [the 2008 financial year] does not reflect our long-term prospects and underlying profitability. It reflects the current weakness in insurance cycles in our core markets.
“We continue to be of the view that the group is well positioned to improve its performance once more normal operating conditions prevail.”
QBE, which made a A$7.7bn bid approach for IAG on 10 April, has seen its share price more than triple from A$8.15 to A$27.55 since 2004.