But insurer says it remains willing to engage in further talks

IAG has formally rejected rival QBE's takeover approach following a meeting of the two company's boards.

In a statement IAG said it could not recommend the QBE proposal on the grounds it was "priced opportunistically" to take advantage of the short-term weakness in IAG’s share price.

The insurer repeated its claim that QBE's revised offer, consisting of 0.145 QBE shares and 90 cents cash per IAG share - equating to $4.60 per IAG share - was insufficient.

It said: "[The offer does not adequately reflect the underlying value or the significant synergies and value which could be created by combining the two companies."

IAG added that the proposal was not a fully developed offer or bid, but said it was open to further talks.

IAG Chairman, Mr James Strong, said: “During the past five weeks... QBE has had ample opportunity to put forward a proposal that recognises IAG’s value but has failed to do so.

“We remain willing to engage further with QBE with a view to securing a fully developed offer that provides an acceptable premium and price.

James Strong, chairman, IAG

“We remain willing to engage further with QBE with a view to securing a fully developed offer that provides an acceptable premium and price.

“Alternatively, if QBE considers that its proposal is sufficiently attractive it is able to put a fully developed offer directly to IAG’s shareholders."

QBE has already revised its offer for IAG on two occassions. Its latest bid is broadly in line with analysts' valuations of the business. IAG's share price fell over five per cent yesterday as speculation that it was set to reject QBE's offer intensified.

Strong added: “Discussions to date with QBE have not explored other important terms and conditions. An essential issue in any transaction involving insurance companies is a comprehensive understanding of each of the businesses including adequate due diligence by both parties particularly given the long tail nature of some of the risks underwritten in those businesses.”

The statement added that the underlying performance of IAG was improving and further steps were being developed in a review of all operations and structures, including the UK businesses. The company has issued three profit warnings in the past seven months.