WASHINGTON: QBE will sell agency businesses in North America to Alliant Insurance Services for about $US300 million as the insurance giant seeks to trim the complexities around its business.
John Neal, CEO QBE Group described the sale price as attractive for our shareholders. Under the agreement, QBE will get $US217 million upfront with the balance payable over five years.
Frank O’Halloran, QBE’s former acquisition hungry boss spearheaded the insurer’s expansion into North America in 2006. The company has said in October that it was exploring options for its businesses in the US, which has been hit by a series of woes including expensive drought claims and losses from Hurricane Sandy in 2012 the second costliest hurricane in US history.
Mr. Neal said that important element of the sale is the long term agreement that we have entered into to retain the underwriting business provided by the agencies. We look forward to continuing to grow our program business and to working with Alliant and CAU, Deep South and SIU.
QBE’s strategy is to simplify and focus on the core business, and they have flagged further divestments including the partial float of the Australian LMI (lenders mortgage insurance) business.
Ross Barker, managing director of Australian Foundation Investment Company said selling parts of the US business that were noncore was always going to be an issue about waiting until they got an attractive deal done. AFIC, which numbers among QBE’s top 15 biggest investors, said it was prepared to back the management on this deal.
Mr. Barker said they needed to do something with that part of the business it’s one of their problematic areas. It’s good to see they have been able to pull this off.
QBE shares have fallen 9.8 per cent in the past 12 months to $10.54, compared with the 0.2 per cent gains of the benchmark S&P/ASX200 index.
