Release - May 13 2004
QBE Purchases Balance of QBE Mercantile Mutual Joint Venture in Australia
QBE Insurance Group
Limited today advised that, subject to regulatory consents and definitive
contracts, it had agreed to purchase ING’s 50% share in the QBE
Mercantile Mutual joint venture in Australia and ING’s Australian
general insurance underwriting business conducted by Mercantile Mutual
Insurance (Australia) Limited (“MMIA”) and Mercantile Mutual
Insurance (Workers’ Compensation) Limited.
gross written and net earned premium from the purchase for a full year
are expected to be $650 million and $580 million respectively. This includes
ING’s 30% share of workers’ compensation business underwritten
The initial purchase
price for the general insurance underwriting interests is $740 million.
Net tangible assets of these interests at date of completion, which is
expected to be 30 June 2004, is a minimum $380 million, including close
to $1 billion of cash and liquid investments and $620 million of net insurance
liabilities. An additional $25 million is payable in February 2007 subject
to run off of pre-joint venture net insurance liabilities.
To initially fund
the purchase, QBE intends to use existing funds and short term bank facilities.
These will be replaced during the remainder of 2004 through a combination
of medium and long term debt. QBE also intends to arrange an orderly conversion
of up to 70% of the LYONs hybrid securities to ensure QBE retains a strong
capital adequacy and a debt to equity ratio of less than 40% by 31 December
Mr Frank O’Halloran,
CEO of QBE Insurance Group Limited, said “We are confident that
the acquisition of ING’s 50% interest in the Australian joint venture,
together with the 30% share of QBE’s workers’ compensation
business, will be earnings per share positive from year one after the
conversion of 70% of the LYONs securities”. He added “The
price paid for the acquisition reflects the quality of the insurance profitability
of the joint venture and workers’ compensation business.”
QBE has also agreed
to purchase, subject to definitive contracts, Mercantile Equities Pty
Limited, a small subsidiary of MMIA, the price and profits of which are
not material and are not included above.
For further information, please contact:
2 9375 4400
2 9375 4216
2 9375 4102