QBE will spin off its Australian lenders’ mortgage insurance (LMI) division and create joint ventures for two local agencies as part of a wider capital management plan that will raise about $US1.5 billion ($1.6 billion).

Group CEO John Neal says joint ventures for strata specialist CHU and the Underwriting Agencies of Australia (UAA) mobile and plant equipment business should be in place by the end the year.

“Our agency businesses are highly valued but in reality, from QBE’s perspective, we value the underwriting that comes with these agency businesses,” Mr Neal told a briefing.

QBE is also selling North American agency operations, and expects within months to finalise the previously announced sale of central and eastern European businesses.

“A prerequisite to the proposed agency transactions is that we retain the underwriting rights over the long term, which will continue to positively contribute to both our results and our growth ambitions,” Mr Neal said.

QBE has appointed financial advisers for the North American and Australian deals and says it expects strong interest from industry buyers and financial investors.

UAA launched in Newcastle in 1972 and became a wholly owned subsidiary of QBE in 2008, while CHU was founded in 1978 and has been fully part of QBE since 2004.

QBE says its other Australian agency businesses are “inextricably linked” with the underwriting and are not as suited to separating from the main group.

Other businesses include Elders Underwriting Agency, debt collection agency Austral and Trade Credit Underwriting Agency.

QBE will also spin off a minority stake in its Australian LMI business, in an initial public offering (IPO) next year.

The LMI business is “incredibly capital-intensive” and has growth ambitions better pursued independently, according to QBE.

CFO Pat Regan says it is a “business that will benefit from its own access to third-party capital”.

QBE LMI reported gross earned premium of $274.5 million last year, according to Australian Prudential Regulation Authority general insurance statistics. Gross incurred claims were $64.37 million and net profit was $131.57 million, the data shows.

After the IPO announcement Moody’s Investors Service affirmed QBE LMI’s insurance financial strength rating at A2 but downgraded its outlook to negative from stable.

Senior Credit Officer Ilya Serov says support from the parent company may diminish after the IPO because of a reduced shareholding, but LMI will benefit from greater access to capital markets and increased funding diversity.