Insurer goes on a spending spree with five new buys

Australian insurer QBE has announced that currency changes for the Australian dollar will mean profits up 25% on predictions. The company has gone on a spending spree in the US and Europe.

At A$1 to US 70 cents and Sterling 40 pence, QBE Group’s 2009 gross written premium and net earned premium targets have been pushed up 25% on 2008 expectations, the company announced.

QBE said: “With around 80% of QBE’s premium income in currencies other than the Australian dollar, the depreciation of the Australian dollar, particularly against the US dollar and Sterling, has had a significant positive impact on QBE’s revenue. 2008 targets advised in August now upgraded to gross written premium growth of 7.5% to A$13.3bn (£5.5bn) and net earned premium growth of 10% to A$

“2009 gross written premium expected to be around A$16.5bn and net earned premium around A$, based on cumulative average Australian dollar exchange rates of US 70 cents and Sterling 40 pence and including anticipated organic growth and acquisitions in 2008.”

QBE is buying ZC Sterling Corporation (ZCS), a US based niche underwriting agency placing insurance on behalf of mortgage lenders and homeowners plus two additional underwriting agencies in the US, one in Europe and a renewal rights portfolio in the US.

Initial up-front cost of acquisitions is $695m (£452m) with further incentives payable if profit targets are met. The acquisitions expected to add gross written premium of $525m and profit after tax of around $175m in the first full year.

ZCS is a US based underwriting agency specialising in providing banks and mortgage originators with lender placed property insurance and also voluntary (conventional) property insurance directly with homeowners.

ZCS is estimated to produce gross written premium revenue in 2009 for QBE of around $425m and estimated profit after tax of around $150m.

The company is using a A$2bn share placement to fund the acquisitions.