When nothing else is doing on the stock
market, a punter can always buy some IAG shares and then spread a rumour about
QBE looking at a takeover bid.

Or perhaps an investment banker reworking
that old proposal could give it a push along to try to make something happen.
Nothing like a bunch of hedge funds piling into a stock to help destabilise it
had contribute to movement at the station.

Last week IAG shares were rallying on just
that excuse, with an extra push on Friday taking it to $5.72, up more
than 6% for the week. All the rally seemed to be based on the QBE

This morning though, IAG is off 10 cents at
midday as the rumour once again fails to bear fruit. So it goes.

There are reasons why an investment bank or
two would be trying to interest QBE in IAG – apart from their fat fees, of
course. IAG is a nice, big, safe domestic general insurer. QBE is a nice, big
international insurer and re-insurer – the second biggest player in the Lloyd’s
of London game. IAG’s lower risk domestic retail business would provide something
of an anchor and balance for QBE’s re-insurance and its huge appetite for
overseas acquisitions.

The market has enjoyed its ride on the
acquisitive QBE’s back ever since it bounced back from the September 11 plunge.
But at some stage someone should start wondering just how successfully QBE is
bedding down its steady diet of takeovers.

Just as the banks having fallen expensively
behind in amalgamating and up-dating their computer systems, QBE hasn’t been
spending anywhere near what one might expect on IT. Just how many different computer systems can
one financial risk company competently run?

And then there’s IAG. By way of disclosure,
there are a few IAG shares in my super fund and a few in a bottom drawer from
when NRMA Insurance de-mutualised.
They’re there because I think Michael Hawker is doing a very good job as
CEO and because I don’t think chairman James Strong will be pushed by the
market to do acquisitions for the sake of acquisitions. IAG is looking
carefully in Asia for opportunities and is slowly finding them – which is the only
way to do it.

IAG seems to have a healthier culture than
QBE, a culture that would be unlikely to survive what would be an expensive
takeover if it ever happened. And who’d want to be part of a company whose main
sponsorship is some Aussie Rules team?

The market would like IAG do be sexier and
grow faster, maybe to be taken over by QBE, but the company is doing nicely as
it is. Greed can be a terrible thing, particularly in an insurer.