REFILE-UPDATE 3-Australia's IAG rejects $6.8 bln bid from QBE

(Refiles to correct 'is' to 'has' in fourth paragraph) (Adds industry details, fund manager comments)

By Denny Thomas

SYDNEY, April 15 (Reuters) - Insurance Australia Group Ltd (IAG) (IAG.AX: Quote, Profile, Research, Stock Buzz), the country's top home and car insurer, rejected as too low a A$7.3 billion ($6.8 billion) bid from bigger rival QBE Insurance Group Ltd (QBE.AX: Quote, Profile, Research, Stock Buzz), sending IAG shares up more than 14 percent on expectations of a higher offer.

Australia's A$30 billion general insurance industry, with more than 100 providers, has been battered by bad weather, while intense competition has squeezed premiums, forcing companies such as IAG to expand into Asia and Europe and triggering talk of mergers at home.

QBE, which has acquired 110 companies in the past 25 years, has been cited as a potential buyer of IAG after IAG's shares slid last year following profit declines and as its UK expansion failed to meet market expectations.

"IAG has been a disappointing business for the last two-and-half years and I think the board will be happy to let the thing go at the right price," said Anoop Kalra, a fund manager with Souls Funds Management, which owns QBE shares.

He said the offer looks generous but there was potential to sweeten it by 5-10 percent or to about A$4.40 per share. At that price, IAG's price-to-earnings ratio for fiscal 2009 profit would be about 13, a multiple at which IAG has historically traded at, Kalra said.

QBE offered 0.142 of its own shares and A$0.70 in cash for every IAG share. At current prices, the offer is worth about A$3.93 a share. IAG shares were up 11 percent at A$4.29 at 0257 GMT, suggesting investors expect a higher offer. The broader market was up 0.9 percent.

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