QBE spends $1 billion to buy mortgage insurer
QBE Insurance is buying the Australian and NZ operations of underperforming US-based PMI Mortgage Insurance, and has agreed in principle to buy PMI’s Asian operations as well.
The insurer announced on Thursday it will complete the purchase of the local PMI operations – subject to regulatory approval – by September.
PMI Australia is an insurer for lenders and represents 40% of the Australian residential mortgage insurance market. It has an expected 2008 gross written premium (GWP) of $200 million, including $5 million through its NZ branch. PMI Asia has a GWP of about $12 million.
QBE CEO Frank O’Halloran says the purchase is in line with the company’s strategy of diversification.
“The acquisitions have been structured to allow us to meet or exceed our minimum profit requirements even in the event of extremely adverse economic conditions over the next three years,” he said.
Using US generally accepted accounting principles, QBE has valued the companies’ net tangible assets at $1.03 billion.
QBE will fund the initial cash component of the acquisition using $522 million of excess capital and borrowings of $300 million.
The purchase comes three months since QBE walked away from a move to buy IAG. Business commentator Robert Gottliebsen says while PMI might not equal IAG in terms of scope, it is nevertheless “of sufficient size, sufficiently strategic and sufficiently Australian to build and diversify QBE’s local premium and earnings base”.
Ratings agency Standard and Poor’s (S&P) has affirmed QBE’s A- rating and its A+ ratings on its core operating entities and retained its stable outlook.
Fitch Ratings has also affirmed QBE’s stable rating.
S&P also affirmed PMI Australia’s AA- rating, while moving its outlook to negative. It says the company has satisfied various financial and operational measures.
The insurer announced on Thursday it will complete the purchase of the local PMI operations – subject to regulatory approval – by September.
PMI Australia is an insurer for lenders and represents 40% of the Australian residential mortgage insurance market. It has an expected 2008 gross written premium (GWP) of $200 million, including $5 million through its NZ branch. PMI Asia has a GWP of about $12 million.
QBE CEO Frank O’Halloran says the purchase is in line with the company’s strategy of diversification.
“The acquisitions have been structured to allow us to meet or exceed our minimum profit requirements even in the event of extremely adverse economic conditions over the next three years,” he said.
Using US generally accepted accounting principles, QBE has valued the companies’ net tangible assets at $1.03 billion.
QBE will fund the initial cash component of the acquisition using $522 million of excess capital and borrowings of $300 million.
The purchase comes three months since QBE walked away from a move to buy IAG. Business commentator Robert Gottliebsen says while PMI might not equal IAG in terms of scope, it is nevertheless “of sufficient size, sufficiently strategic and sufficiently Australian to build and diversify QBE’s local premium and earnings base”.
Ratings agency Standard and Poor’s (S&P) has affirmed QBE’s A- rating and its A+ ratings on its core operating entities and retained its stable outlook.
Fitch Ratings has also affirmed QBE’s stable rating.
S&P also affirmed PMI Australia’s AA- rating, while moving its outlook to negative. It says the company has satisfied various financial and operational measures.