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The collapse of HIH (Australian Insurance company) - Essay Example

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Such was the case with HIH. A publicly listed company, HIH, was once regarded as the second largest insurer in the general segment in…
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The collapse of HIH (Australian Insurance company)
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Download file to see previous pages Moreover, analysts were concerned with the increase in the capital adequacy requirements in favor of the insurers. It was basically a proposal by Australian Prudential Regulatory Authority (APRA) in 2000. (A Chronology of Key Events, n.d) This was followed by selling part of domestic business to German based Allianz at about $500 million. The same year also saw the tumbling of share prices reaching to the lowest ever. Markets blamed the Allianz deal. The following year saw the most heartening part of HIH as it estimated $800 million loss and enters into a position of provisional liquidation. Both Australian Securities & Investments Commission (ASIC) and Royal Commission after analyzing the documents finally forced the company to close down its operations which marked the collapse of one of the biggest corporate ruins in Australia. (Kehl, 2001)
Many would opine the fact that the sudden demise of such a huge insurer firm is generally due to its aggressive business strategies. It has moved on to acquire FAI and within a year or two it has again made a move to sell off its part of business to Allianz. Also another most remarkable part of the story is regarding its subsidiaries. The company recorded to have more than 200 subsidiaries world-wide. This extensive creation of subsidiaries has affected the business as a whole. With such expansion policies and an average of 26% a year of growth, the company struggled hard to find its way through as the market was experiencing enough competition especially from its overseas operations in UK and US. (HIH Insurance, 2001) Even one of the prime liquidators of HIH, Mr. McGrath also opined that the FAI Insurances were of no value when HIH bided for $295 million. (Sexton, 2009)
The main motive that is to be considered in acquiring FAI Insurance by HIH was to make a significant mark in the Australian insurance industry. Therefore in 1995 the ...Download file to see next pagesRead More
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