Reporting market speculation is part and parcel of a journalist’s work, but it’s an activity fraught with hazard. The lines bordering opinion and conjecture are very thin.

Our job at insuranceNEWS.com.au is to find the facts hiding in the speculation. To achieve this we rely on a large network of industry sources. Insurance is a global business, and we often find professionals in foreign markets can give us pieces of information that help us more than a local source can.

Our sources trust us to use the information responsibly, and they know we will check what they have told us. Putting together the pieces is Journalism 101, but in the 24-hour news cycle world of media today, tracking down information in this way is time-consuming and therefore increasingly rare. Most news organisations just fire away with what they have, no matter how irrational the information.

Of course, journalists aren’t helped in their endeavours by the fact that secrecy is essential in negotiations over mergers and acquisitions. The stakes are high, and companies’ standard answer to media enquiries is that they don’t comment on market speculation.

So even if they’re not doing anything, they won't tell us. That’s perfectly proper, but speculation breeds in an information vacuum. Here’s an excellent example:

In late October the Australian Financial Review said Zurich Australia was negotiating to buy Wesfarmers Insurance. The few bits of information the article presented as evidence didn’t add up to a whole lot.

But it was nevertheless compelling stuff, because if it were true it would result in a far more powerful Zurich in Australia and alter local market dynamics. So no matter how sketchy it all seemed, the report couldn’t be ignored.

Right from the start we didn't see how a broker-focused commercial lines-only operation like Zurich would want to try absorbing a business whose companies stretch across everything from personal lines to distribution, and many informed market sources agreed with us.

However, we were also aware of low-key discussions a few years ago about the possibility of Lumley Insurance being sold; and we knew Lumley would be a good fit for Zurich. So that’s how we reported it.

Contacts we trust then told us the broker distribution side of the business wasn’t for sale at that point, and they had convincing evidence of this. Most professionals we spoke to said the Financial Review journalists didn’t understand how implausible this rumoured merger would be.

And sure enough, after a further report with a few more crumbs of information, the Fin finally conceded that Zurich’s target would be Lumley, not the lot.

For all we can establish to our complete satisfaction, that’s where the whole thing might have died. No one is talking, after all. Wesfarmers Insurance continues to be profitable and well-supported by its masters in Perth. The Fin’s reporters, having barked, moved on. So did we, but then new pieces of information started turning up.

On Friday the Fin reported that Wesfarmers and Zurich had been scared off by the revelations of an impending sale, and today it reports that IAG is considering a $2 billion buyout of the division.

The likelihood of the parties scurrying back into their burrows as the result of a newspaper report is most unlikely, but the IAG report basically accords with information insuranceNEWS.com.au received last week.

We have also been told that Allianz Australia and QBE did the sums recently on Wesfarmers Insurance. Yes, QBE. Just because the US arm of the empire is bleeding doesn’t mean the group should lose focus on growth opportunities elsewhere.

And there are some ancillary facts that do tend to support the likelihood of Wesfarmers Insurance being for sale.

Australia’s insurance market is one of the most competitive in the world. To ensure continuing growth in this environment, Wesfarmers would have to invest more in its insurance division to enhance its earning capabilities. But there are no significant acquisitions available, and even if there were their price tags would be equally significant.

Wesfarmers is a great reader of market dynamics, and it could easily have reached the conclusion that this is an ideal time to be a seller rather than a buyer.

Lumley is a much more tightly managed company than the one Wesfarmers bought in 2003, and brokers OAMPS and Crombie Lockwood would not be difficult to sell.

And a source we respect has noted that Wesfarmers would have no particular need to keep underwriting its Coles Insurance business, when it could let someone else carry the risk while it picks up a decent percentage for renting out the brand.

The group also waited six months to appoint a managing director to replace Rob Scott, who transferred out to Coles at the start of the year. insuranceNEWS.com.au is aware that an extensive executive search was conducted. But companies like Wesfarmers don’t employ external CEOs if they’re planning to sell the company shortly after. The job eventually went to insurance division CFO Anthony Gianotti – a highly regarded career executive at Wesfarmers.

We have many more similarly small and possibly related pieces of information from good sources – but we can’t confirm a thing. And while we believe there are plenty of reasons for something to be happening at Wesfarmers Insurance, we can’t say there is.

And even if there is something happening right now, that doesn’t mean that anyone will necessarily do anything about it.

Newspaper reports quoting analysts and insuranceNEWS.com.au articles pulling together bits and pieces of information place us in the uncomfortable position of former US Defence Secretary Donald Rumsfeld, who said in 2002:

“There are things we know that we know. There are known unknowns. That is to say, there are things we know we don’t know. But there are also unknown unknowns – things we do not know we don't know.”

Rumsfeld was trying to explain how much the US knew or might not know about Iraq supplying weapons of mass destruction to terrorists. In his case, he added up what he thought he knew and turned out to be dead wrong. We don’t think we are.