Insurance Group (IAG) of Australia which has entered into a Memorandum of Understanding with State Bank of India (SBI) on Tuesday for its proposed expansion into the general insurance business is currently facing take over threat from another Australian insurer QBE.

Interestingly, OBE has an existing tie-up in the country with Raheja group for setting up a general insurance company.

QBE in its website has advised its shareholders that its proposal of 0.142 QBE shares and $0.70 cash per IAG share, to merge with IAG via scheme of arrangement, has been extended to 5pm Monday, 19 May 2008.

Frank O’Halloran, QBE Group CEO, said ?The proposal has been extended to allow stakeholders more time to consider the impact of IAG?s profit downgrade announced last week and the value of

QBE shares. QBE remains interested in seeing through a friendly merger with the recommendation of IAG?s board.?

However a senior official said the bank is very much aware of the take- over development of QBE by IAG.

?We have studied the development and are sure that the proposed take- over of IAG by QBE is not happening,?? said the official.

Ernst & Young had advised SBI for finalising the general insurance venture.

Both- SBI and IAG will now jointly work towards finalising a shareholders’ agreement and immediately thereafter approach regulatory authorities for their necessary approvals.

SBI hopes to commence business in the current financial year and aspires to be amongst the top three players in the general insurance space in a period of about ten years.

SBI is the leader in the Indian banking sector, with over 100 million customers and 10,000 plus branches across the country, one of the most trusted brands in India, and a heritage dating back over 200 years.

?Establishing a general insurance joint venture is a key element of SBI’s strategy to pursue emerging, high growth opportunities to build on our position as the pre-eminent financial services group in India,? deputy managing director (CS & NB) Chawla said.

?IAG’s proven capabilities in technical and underwriting expertise, pricing and risk management, and its track-record in working successfully with other partners in the Asian region, make IAG an ideal partner. We look forward to working together to grow a successful general insurance business.? He added.

IAG is an international general insurance group, with operations in Australia, New Zealand, Thailand, Malaysia, China, Singapore and UK through various brands. Its current businesses underwrite more than Australian Dollars 7.5 billion of premium per annum. It employs more than 16,000 people of which around 11,000 are in Australia. It sells insurance under many leading brands including NRMA Insurance, CGU, SGIO, SGIC and Swann (Australia); NZI and State (NZ); Equity Red Star and Hastings Direct (UK); and NZI and Safety (Thailand).

It has a good presence in major segments of the GI market like, auto insurance, property and casualty and commercial business. It has experience in all channels of distribution including ?bancassurance? channel. One of its key strengths is that the company is only in general insurance.