Fai Down To $22.4m Loss In First Quarter
Sydney Morning Herald
Wednesday October 14, 1998
FAI Insurances yesterday revealed a pre-tax loss of $22.4 million for the first quarter, compared with its latest full-year result, a $4.7 million loss.
It blamed volatile equity markets for the big slump in profitability.
FAI's chief executive, Mr Rodney Adler, said the first quarter's loss was "significantly below budget" and that FAI issued the "preliminary" management accounts to keep shareholders fully informed during the takeover period.
However, all was not doom and gloom, with Mr Adler describing the general insurance result as coming "in line with budget but slightly below last year".
Some analysts were sceptical, however. "Weak equity markets don't explain the entire loss, the insurance business must have had a very bad quarter as well," one analyst said, indicating that he thought the insurance book was still labouring.
While FAI has less than half its book exposed to the Australian equity market at any time, the amount, according to Mr Adler, still adds up to "several hundred million".
FAI shares fell 2c to close at 65c - the price affected by the scrip nature of HIH's bid and the fact that many investors were buying FAI as a cheap entry into HIH.
Last night, Citibank popped up as a 10.2 per cent stakeholder in FAI, following the merger of Travelers and parent Citicorp in the US. A spokesman for Citibank said Travelers' Australian stockbroking subsidiary, Salomon Smith Barney, had bought the stake "some time ago". Salomon Smith Barney was active in the market yesterday, buying 1.9 million FAI shares.
QBE has ruled itself out of the FAI race but sources suggest large US-based group Liberty Mutual may be looking at bigger acquisition targets than the beleaguered FAI.
While FAI's corporate adviser, Goldman Sachs, continues its search for a rival bid to HIH's $290 million offer, sources suggest the Guinness Peat Group - Tyndall's parent - could be buying FAI shares.
On Monday Tyndall Australia announced it had taken a 5.2 per cent stake in FAI's 48 per cent-owned subsidiary, FAI Life, to ensure "a seat at the table" when FAI went up for grabs.
© 1998 Sydney Morning Herald
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