QBE Insurance Group, Australia's top insurer by premium income, said on Friday it will buy Winterthur US Holdings from France's AXA for US$1.16 billion to boost its U.S. presence, buoying its shares.
Wisconsin-based Winterthur US writes property and casualty insurance risks through 1,700 independent agents in 33 states of the U.S. Its gross premium income for 2007 is expected to be around US$1.45 billion and QBE forecasts the deal to bring in net profit after tax of about US$160 million in the first full year.
"It'll be very well received by the market," Credit Suisse analyst Arjan van Veen said. QBE shares were as much as 7 percent higher in early trade.
AXA, which bought Swiss insurer Winterthur in June last year, said in a statement that Winterthur US would repay US$636 million of inter-company loans to the Winterthur Group.
QBE is raising about A$800 million (US$630 million) through a share placement to part-fund the acquisition. It will also use existing excess capital and short-term debt to fund the purchase, and its acquisition of Praetorian Financial.
QBE said last month it had purchased Praetorian for US$800 million from German reinsurer Hannover Re. "If you combine this with the Praetorian acquisition that they did in December, their footprint in the U.S. is now quite large. These are two very sizeable acquisitions and this is another 15% growth in terms of the group, in terms of premiums," Arjan Van Veen said.
Post the acquisition, QBE's debt-to-equity ratio will remain at around 40%, the company said. The acquisitions are expected to be completed in the second quarter of 2007.
"Winterthur US gives us a strong footprint in western, mid-west and north-east U.S. states for small-to-medium property and casualty business through a large base of independent agents," said Frank O'Halloran, QBE Group Chief Executive Officer, in a statement.
"By contrast, the Praetorian acquisition announced in December will more than double the size of our U.S. specialist insurance program business," he added.
Annualized gross premium income from QBE's American operations is expected to be around US$4.6 billion, slightly less than 40% of QBE Group gross premium income. The acquisition is subject to regulatory approval.