The selldown by NSW motoring services body NRMA of a large parcel of IAG shares has raised speculation about the two organisations’ future relationship. 

NRMA has sold more than 13 million IAG shares, taking its shareholding in the insurer to 16 million shares, despite an agreement that prevents NRMA from decreasing its shareholding in IAG below 29.3 million.

The agreement was part of a 2000 deal under which NRMA split its insurance and roadside assistance arms, demutualising and spinning off the insurance business to become IAG.

It states that the shareholding must be maintained for the duration of the trademark relationship agreement which sees the motoring association maintain ownership of the NRMA trademark, but allows IAG to use it to sell insurance.

NRMA Insurance is IAG’s flagship direct insurance brand in NSW, Queensland, the ACT and Tasmania.

The information memorandum allows for the trademark licence to be terminated “if there is a serious breach by one of the parties”.

NRMA is prevented under the deal from selling financial services and insurance products and pays IAG around $10 million a year for the use of IAG’s technology system, branch network, call centres and back-office functions.

The share sale raises questions over how happy NRMA is with the arrangement and has also raised speculation that the NRMA board has explored the possibilities of separating from IAG and setting up its own insurance operations.

But NRMA Chairman Wendy Machin says the sale decision “was based on financial advice we have been receiving for years that our investment portfolio was way overweight in one particular stock. It was a commercial decision.”

NRMA said in its 2009/10 annual report that IAG’s share price performance was “disappointing” and that its “substantial investment in a single company involves much higher risk than our more broadly diversified portfolio”.

The boards of the two businesses held a joint meeting shortly after the share sale was revealed, reportedly to discuss their future. But Ms Machin says the meeting had been scheduled for six months and was part of the regular process of board-level consultations between the two companies.