NRMA has bought New Zealand’s State Insurance for $325 million. The purchase price was 2.1 times State’s net assets.

The purchase, which had been touted by the media as a done deal for the past month, is “a key step in the company’s strategy to improve shareholder returns”, according to NRMA Chairman Nick Whitlam. The alternatives were to buy something, return surplus equity to shareholders though a share buy-back, or a combination of these, by June.

The purchase of assets that CGNU had decided were not needed – it already owns NZI – puts NRMA in a competitive position in the NZ market. State Insurance holds about 19 per cent of the market, with most of its business in personal lines. Last year it had a $357 million premium income and made a $27.3 million net profit.

Mr Whitlam has indicated that State will be returning profits to NRMA within 18 months. Analysts say NRMA could gain faster returns by putting all State’s back-office functions into Insurance Manufacturers of Australia (IMA), its joint venture with RACV Insurance.