Major publicly-listed insurer QBE has undertaken a series of US and European underwriting acquisitions, the most significant of which is the purchase of underwriting agency ZCS for US$575 million.
At the same time, the big Australian insurer announced that it had reached agreement to acquire two further underwriting agencies in the US and one in Europe as well as the renewal of a rights portfolio in the US.
The acquisitions have prompted QBE to upgrade its revenue forecasts and to announce a capital raising via an accelerated, fully underwritten share placement to institutional investors aimed at raising $2 billion.
The company said it would also be conducting a non-underwritten share purchase plan for eligible retail shareholders to raise $100 million and that it intended to buy back up to $1.25 billion in face value of its tier one perpetual securities issued in 2006 and 2007 in exchange for five year senior notes.
The revenue forecasts have been upgraded to 7.5 per cent in gross written premium and 10 per cent growth in net earned premium based on current exchange rates.
The company told the Australian Securities Exchange that in the first full year the five acquisitions were expected to produce gross written premiums of close to US$525 million and a profit after tax of around US$175 million.
QBE said the initial purchase price for all the acquisitions was around US$695 million.
Commenting on the transactions, QBE chief executive Frank O’Halloran said the acquisition of the four underwriting agencies and the renewal of the rights portfolio was consistent with the company’s strategy of building its distribution channels for profitable niche products.
“Based on our projects and the increased number of shares, the acquisitions will be earnings per share accretive in year one,” he said.
O’Halloran said the capital raisings would assist in funding the acquisitions and QBE’s 2009 growth as well as providing further balance sheet strength and flexibility for other opportunities.
