QBE Insurance Group Ltd raised its hostile bid for Insurance Australia Group Ltd for a second time, offering A$8.7 billion (US$8.3 billion) to keep alive the nation's biggest insurance takeover.

QBE, Australia's largest property and casualty insurer, offered the equivalent of A$4.60 (US$4.39) a share for Insurance Australia's stock, increasing the cash component to 90 cents, it said. Insurance Australia Chairman James Strong said the 6 percent higher bid is still "short of fair value."

Insurance Australia, the nation's biggest auto and home insurer, declined the most in more than two months in Sydney on speculation the bid may fail. Insurance Australia's profit has fallen for three straight years while QBE doubled earnings and market value by acquiring rivals at home and abroad.

"It looks like there's a good chance now that QBE will walk away from the bid, at least for the time being," Richard Wallace, who helps manage US$138 million at Wallace Funds Management in Sydney and this year sold his holdings in both companies, told Bloomberg News. "There will now be enormous pressure on IAG's board to justify their position to shareholders."

Insurance Australia's board is willing to discuss a higher bid, the Sydney-based company said in a statement following QBE's revised offer.

QBE Chief Executive Officer Frank O'Halloran and Chairman John Cloney made their first approach on April 10, with a confidential proposal offering Insurance Australia the equivalent of A$3.75 a share.

That was rejected, as was its first increased bid, valued at A$4.33 a share based on the closing price last Friday. Insurance Australia stock, which rebounded this year on speculation the company would be taken over, fell 20 cents, or 4.5 percent, to A$4.23 in Sydney.