Nrma's $785m Treasure Chest

Sydney Morning Herald

Tuesday September 1, 1998

By ROBERT WAINWRIGHT Transport Writer

The NRMA has $785 million in cash, made a $95 million profit in 1997-98, but cannot decide how or whether to share its wealth with 2 million members.

The financial accounts, to be discussed at this week's board meeting, reveal the company paid its former chief executive, Mr Malcolm Jones, more than $3 million after he resigned to take up a job with a rival firm - just six months after freezing his salary because the board was not satisfied with his performance.

The Herald has obtained company accounts which show that in just two years, since the beginning of the 1996-97 financial year, the cash held by the NRMA - Australia's biggest insurance company - has jumped from $60 million to $785.7 million.

This was due mainly to a decision to sell $440 million in investments. Last year, those same investments were counted as unrealised capital gains and helped the company post a $620 million profit. The documents also showed that customer loans granted had risen ten-fold, from $79 million to $770 million.

The revelations come amid growing frustration among some directors about why the NRMA has not announced a "wealth distribution" scheme.

The company has consistently been operating with reserves up to six times higher than its legal obligations require.

The Motorists' Action Group director, Mr Richard Talbot, has been at loggerheads with the president, Mr Nick Whitlam, about the financial position of the company.

Mr Talbot says because the NRMA is a mutual organisation it must return at least some of the profits to its members, preferably as rebates on insurance premiums.

Last night he refused to discuss the latest financial result until it is announced formally, but said the company was operating far in excess of its statutory obligations.

Mr Whitlam also refused to discuss the financial results yesterday, saying it was improper until they had been approved by the board.

"What directors such as Mr Talbot refuse to concede is that much wealth is already distributed to members," he said.

"For example, insurance rates are provided at less than market rates. We also advance the interests of motorists generally with our lobbying."

Company sources say any decision about wealth distribution has now been delayed until after the completion of a report into the future of the NRMA by Credit Suisse First Boston.

Among the options being considered are paying dividends to members, refunds on insurance premiums and the reintroduction of rebates. The report, due by the end of the year, is also expected to conclude that at least a portion of the NRMA be floated.

Mr Whitlam described First Boston as "world experts" on mutual organisations. Dividends were one option being considered, but the company's articles of association would have to be amended before dividends could be paid.

Mr Talbot said he still favoured the reintroduction of rebates, and wanted motorists who had been members for 50 years or more to be exempted from paying the annual $46 subscription fee.

© 1998 Sydney Morning Herald

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