Johnson Winter & Slattery file proceedings against Insurance Australia Group

Insurance Australia Group Limited (ASX: IAG) is an ASX listed multinational insurance company with presence in many countries like Australia, New Zealand, Indonesia, etc. and is based in Sydney, Australia. The company offers insurance products for homes, businesses, and lifestyle and underwrites a premium of almost $12 billion per annum. Some of the leading brands of the group are NRMA insurance, SGIC, AMI and Lumley (New Zealand), etc.

On 11th April 2019, the company announced that it has been made aware of the proceedings filed by Johnson Winter & Slattery in the Federal Court of Australia. The proceedings have been filed against the company and its subsidiary, Swann Insurance (Aust) Pty Ltd, on behalf of Jones Asirifi-Otchere.

On 28th March 2019, the company announced that it has issued subordinated unsecured notes amounting to A$450 million in Australia. These Subordinated notes in some cases may be converted to ordinary shares of IAG.

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The issue of these Subordinated notes will have no material impact on the financial position of the company, as per the company. If these Subordinated notes are converted to the ordinary shares, it will have an impact on the reduction of the liabilities of the company by the principal amount of the Subordinated notes converted and consequently increase the shareholders’ equity of the company by the same amount.

The maximum number of Subordinated notes to be issued is 45,000. These will be medium-term notes with a term of 26 years, maturing on 15th June 2045 unless earlier converted or redeemed. The interest payable will be a floating rate equal to the three months bank bill swap rate (BBSW) with an addition to a margin of 2.35% per annum. The interest will be payable on a quarterly basis. These Subordinated notes may be redeemed at face value between years 6 and 7 and at any time for certain tax and regulatory events.

There is a maximum conversion number above which the ordinary shares cannot be issued upon conversion. If this maximum conversion number is calculated using a nominal amount of $10,000 and the issue date VWAP of $7.71 per Ordinary Share, it would be:

  • In the case of Conversion on the occurrence of a Non-Viability Trigger Event, 6,485.1 Ordinary Shares per Subordinated Note; and
  • In the case of a Holder Conversion, 2,594.0 Ordinary Shares per Subordinated Note.

Each ordinary share issued upon the conversion of Subordinated notes will rank pari passu with all other fully paid Ordinary Shares. The holders of the ordinary shares will enjoy the rights like gaining voting right at any Annual General Meeting (AGM), rights to receive dividends, entitled to share in any surplus assets on a winding-up of the company (proportionate to the paid-up capital).

On 6th February 2019, the company announced its 1HFY19 results wherein the gross premium increased by 4.1.% to A$5,881 million

The company has a market cap of A$17.54 billion. The stock traded down by 0.66% at A$7.55 after making an intraday low of A$7.45 as of 11th April 2019 (AEST: 2:27 PM). In the last six months, the stock has given a return of 8% while the YTD return stands slightly better at 9.84%.


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