has faced some difficult shareholder questions at its AGM held in Sydney this week.
Many shareholders had questions surrounding the proposed moves into China, which have now been dropped
, as one shareholder said that the U-turn could be down to “the Board doesn't know what they're about.”
Answering shareholder concerns on the China moves, retiring chairman Brian Schwartz said that the deliberation of the company should be praised as a mark of due diligence.
“We have for the last five or six years strategically said that our focus markets will be Australia and New Zealand because we have such great franchises and such great brands and businesses that we will keep focused on them,” Schwartz said.
“The China opportunity was one that we have been focused on for a long time.
“We originally thought that a regional opportunity in China may be the way to go, to at least get us to learn the market and get a feel for the market and we made a relatively small investment in Bohai.
“We came to the conclusion that really that wasn't the long term solution and that we needed to expand our thinking and look at a national player, which is by definition a bigger player. After a lot of work, a lot of due diligence, exploring a lot of opportunities, talking to a lot of people, to our shareholders, to the market but really management doing their own due diligence and coming to the Board, we all came to the conclusion ultimately that China wasn't a place for us at this point in time and so we have consciously said that we will not be pursuing further investment in China.
“Having said that, we do believe that there are many other opportunities in Asia and we are looking at opportunities, continue to expand in India where we have an opportunity to dial up to 49% with our very good partner and we're looking at opportunities in Thailand and Malaysia and Indonesia where we really haven't set up.
“Although having said that, we do think that China is a good long term market.”
Another shareholder, Joe Nagey, questioned the financial performance of the business as profit after tax, return on equity and other metrics dropped over the previous year as he said: “Does all this add up to strong, solid performance? If so, I hate like heck to see what poor performance looks like.”
The $500 million earnings dent made by natural disasters over the previous 12 months was blamed for the dipping numbers year-on-year.
“So if you're comparing year-to-year and you see that the difference is some AUD500 million, it's because there were storms and the like that obviously we can't control, that were over and above what it was we had expected them to be.”
Both Schwartz and outgoing CEO Mike Wilkins also defended criticism of the Wesfarmers acquisition, after Nagey drew comparisons with IAG
’s failed UK insurance business.
Schwartz said the two were not comparable and Wilkins said the integration of the businesses within IAG
was progressing well.
“The reality is that we're very satisfied with that Wesfarmers business. It is delivering what we expected it to deliver,” Wilkins said.
“Strategically it took us to be the largest insurer in Australia in the same way that our previous acquisitions in New Zealand had taken us to be the largest insurer in New Zealand.
“Wesfarmers' New Zealand operations added even further to that, and I think that both Brian and I talked during our initial remarks about the importance of market leadership and the way that that does help us to shape the market.
“So I think financially it was quite sound, but also strategically, which is where it should come from, I think it was also quite sound.”