IAG has declined to comment on speculation that a $NZ150 million ($115 million) New Zealand bond issue announced at last week’s AGM is raising capital to buy troubled mutual AMI Insurance.

A spokesman told insuranceNEWS.com.au that IAG does not comment on such speculation, but noted the group has around $700 million of financial instruments coming up for reset over the next 18 months.

He says IAG has a policy of diversifying its capital base by source and term length, and a New Zealand bond issue would provide a currency hedge for the insurance business there, which includes the State and NZI brands.

CEO Mike Wilkins told the AGM the issue of unsecured subordinated bonds is part of the group’s ongoing capital management program, and the proceeds will be used “for general corporate purposes and to provide additional flexibility in managing future refinancing requirements, including options for the Group’s Reset Preference Shares at their June 2012 reset date”.

Details of the issue will be available in November.