Increased merger and acquisition activity is expected as Australia’s 109 general insurers compete for about 20% of the market, according to a KPMG insurance survey.

The survey says the market has changed considerably. Five years ago there were 170 general insurers authorised to write new and renewal business, compared with 109 this year.

In 1996 the then five largest insurers had a collective market share of 36%. The top five insurers in 2004 – IAG, Promina, Suncorp, QBE and Allianz – now hold 75-80% of the market.

KPMG insurance partner Andries Terblanche says insurers are seeking to maximise their underwriting profitability by widening their policyholder bases. He would be surprised if further consolidation isn’t on the agenda of every insurer.

IAG CEO Michael Hawker said a few weeks ago that he wants to complete an acquisition or joint venture in Asia by the end of this year because there are limited opportunities in the Australian market.

And Allianz AG Holdings, Europe’s largest insurer, has finally reacted to persistent local rumours by stating it has no plans at the moment to sell or float Allianz Australia.

Allianz Australia MD Terry Towell said he’s flattered by the attention, but “we do get a little tired of explaining that Allianz Australia is not for sale”.

Media reports have suggested the Australian unit will be sold or floated after leading British insurer Aviva sold CGU to IAG and Dutch group ING sold its general insurance operations to QBE and decided to float its share of the Austbrokers operation.

Mr Towell says Allianz Australia’s financial outlook for the rest of 2004 is positive, helped by market conditions that are the best in years.