Rumours of a QBE takeover of IAG are gaining traction among analysts, and talk of a $10 billion bid has pushed IAG stock above $5 for the first time since August.

Following a speculative news item posted by Reuters last week, IAG's shares soared nearly 7% to close last Friday at $5.25.

With the share price down more than $1, or about 20%, on its 2007 opening bid - in a market in which prices have risen strongly - Reuters quoted several analysts who felt the stock had sunk to a level that would be attractive to QBE.

Despite purchasing more than 100 companies since 1992, QBE CEO Frank O'Halloran is notoriously frugal when selecting bolt-on acquisitions.

ABN Amro, in a research note to investors last week, said IAG shares could hit $5.60 on takeover speculation.

"In relation to a possible takeover by QBE, the deal looks like it would stack up," the note said. "It is likely that the regulator would only allow one more major insurance takeover, given the fact that there are only a few large players in the market now, so QBE would be keen to move sooner rather than later."

The note said a takeover would be consistent with QBE's strategy of making value-accretive acquisitions and would greatly expand its presence in the Australian general insurance market.

Macquarie Research Equities believes an offer for IAG will not be made in the short term as QBE chases cheaper options overseas.

Speculation of a QBE takeover of IAG has swept the market three times in the past four years. In 2006, talk of a takeover sent shares to a five-year high.