Iag Chief Resigns As Investors Vent Anger

Sydney Morning Herald

Tuesday May 27, 2008

Colin Kruger

THE chief executive of Insurance Australia Group, Michael Hawker, resigned yesterday, taking the blame for the struggling insurer's lacklustre performance and a shareholder backlash over the company's decision to reject an $8.7 billion offer by its rival, QBE, last week without consulting investors.

The chief operating officer, Michael Wilkins, takes over as chief executive with immediate effect. Mr Wilkins, a former chief executive of another insurer, Promina, joined IAG late last year at a time of profit downgrades, raising speculation that he was being groomed for the top job should Mr Hawker make any more slip-ups.

"I believe we are currently undervalued and our underlying performance is improving. However, I also believe I have lost the confidence of a number of our shareholders, which is not tenable for the company," Mr Hawker said in a statement to the stock exchange yesterday.

"Given ultimate accountability sits with me, I have offered my resignation to the board".

Questions remain as to whether he was being used as a scapegoat by the IAG board, which has also been blamed for the company's problems, including ill-fated acquisitions in Britain, and was directly responsible for handling the QBE offer.

"There are some people on that board who should be hanging their head in shame today," said 452 Capital principal, Peter Morgan, who is one of IAG's biggest shareholders.

"Michael [Hawker] has been in charge of the company but that has been at the direction of the board ... and I don't think Michael is 100 per cent responsible for the mistakes that have been made."

Mr Morgan has not been the only critic. A Merrill Lynch analyst, Andrew Kearnan, said in a note to clients last week: "What is clear to us is that there is a distinct lack of insurance operational expertise on the IAG board and this appears to have been one of the causal factors behind some of the strategic decisions that have been made by IAG in recent years,"

IAG's chairman, James Strong, speaking yesterday for the first time since he rejected QBE's bid, praised Mr Hawker and denied he was taking all the blame.

"I think we made it plain right back to the AGM last year that the board was very disappointed with how things were trending, and so nobody is trying to say this was entirely Mike's fault," Mr Strong said.

IAG also announced a review of its businesses in Australia and overseas, with details expected to be announced in early July.

"It had started as part of our own dissatisfaction with performance even before QBE came on the scene, obviously, so now there is just an increased requirement on us to review everything and to talk to the market," Mr Strong said.

Mr Hawker was helping IAG with the review, Mr Strong said.

Mr Morgan criticised the timing of the review - just a week after IAG rejected QBE's bid - and the possibility that the incoming chief executive might use it as a clean-slate opportunity to write off underperforming assets.

Malcolm Maiden - Page 18

© 2008 Sydney Morning Herald

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