Elders sells insurance arm to QBE Insurance
QBE Insurance has acquired Elders’ insurance arm in a deal worth $315 million. Elders was placed in a trading halt yesterday at its request pending an announcement of the sale.
QBE Insurance will also acquire 75 per cent of the insurance agency’s businesses and subscribe for 12 per cent of Elders' shares. Elders will retain the remaining 25 per cent of its insurance agency business and has the option to repurchase another 25 per cent before December 31.
Net assets of the sale are estimated to be $105 million, and the business is expected to generate approximately $500 million in gross written premium in 2010, including $400 million in additional premium for QBE.
The managing director of Elders Insurance, Tim Plant, will continue in his role.
Elders negotiated the sale in an effort to reduce its debt. According to a report in the Sydney Morning Herald, the sale of Elders' insurance arm will help it realise the $150 million in cash the regulators require it to set aside for insurance losses.
The management team will meet its bankers in Melbourne this morning to discuss its debt, the article said.
Elders has negotiated a three-month extension on its loans until the end of September, according a statement released to the Australian Securities Exchange. An open briefing by the chief executive and chief financial officer said the company’s debt was expected to reach $800 million at June 30.
The company has sold $270 million worth of assets in an effort to reduce its debt, and hopes to reduce the amount by a further $100 million through asset sales, including selling its shareholding in HiFert and their aquaculture interests.
The company posted a profit of more than $45 million during the financial year, an increase of 10 per cent from last year’s result. The managing director, Paul Hutchinson, said the result highlighted the quality of the loan book and the strength of its funding composition.
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
