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Insurance industry

QBE Insurance Group Expands US Operations with US$800 Million Acquisition

Strategic Insights

— 1 min read

QBE Insurance Group Ltd, an Australian insurer, has significantly expanded its operations in the United States with the acquisition of Praetorian Financial Group (PFG) for US$800 million. This move follows the recent purchase of National Farmers Union Property and Casualty Company for US$140 million in 2005 and the One Beacon Agriculture division earlier this year. The acquisition is expected to boost QBE's presence in the US specialist insurance market and add about US$1.4 billion to its gross premium income annually. The company expects to fund the acquisition using internal excess capital, dividend reinvestment, and short-term debt.

Key Takeaways:

  • QBE Insurance Group Ltd has acquired Praetorian Financial Group (PFG) for US$800 million, expanding its operations in the United States.
  • The acquisition adds about US$1.4 billion to QBE's gross premium income annually and bolsters its presence in the US specialist insurance market.
  • PFG writes 37 specialist property and casualty insurance programs through managing agents and has a specialist retail agency business through brokers.
  • QBE expects its insurance profit to be about 20 per cent of net earned premium, with a net profit expected to jump by a similar degree to last year's leap of 29 per cent to A$1.09 billion.
  • The acquisition is expected to be completed in the second quarter of 2007 and be earnings per share accretive in its first year.
  • QBE shares closed five cents higher at A$26.30 following the announcement of the acquisition.

Statistics:

  • US$800 million: QBE's acquisition price for Praetorian Financial Group (PFG)
  • US$1.4 billion: Annual gross premium income added by the PFG acquisition
  • US$460 million: Expected net assets of PFG on completion
  • 20 per cent: Expected insurance profit as a percentage of net earned premium
  • 29 per cent: Increase in net profit for the previous year
  • A$1.09 billion: Expected net profit for the current year
  • 17-18 per cent: Previous guidance for insurance profit margin
  • 15 per cent: Previous guidance for net profit increase
  • US$140 million: Acquisition price for National Farmers Union Property and Casualty Company
  • 37: Number of specialist property and casualty insurance programs written by PFG
  • A$26.30: Closing share price of QBE after the acquisition announcement

Sources:

  • Asia Pulse, Dec 13, 2006
  • Australian Securities Exchange (ASX), QBE Insurance Group Ltd (ASX:QBE)
  • AAP, 13-12 1927

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