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QBE Makes American Acquisition
Australian insurance major QBE Insurance Group is set to acquire US crop insurance company NAU Country Insurance in a deal valuing the insurer at $604 million. The cost of the acquisition has been labelled cheap by market analysts.
The purchase price amounts to seven times NAU’s estimated 2010 after-tax profit, according to QBE. It is also 2.6 times NAU’s net tangible assets of $US217m.
According to QBE’s senior management, he purchase price relative to the targets book value reflected the fact that the majority of this year’s profits will be delivered in the latter half of the calendar year.
Chief executive Frank O’Halloran said: “The acquisition is in line with QBE’s long-term strategy of acquiring specialist businesses to further enhance our significant product diversification and distribution.”
QBE last month said it was looking at a number of acquisition targets in both Australia and various other parts of the world.
In February, QBE said it had $2.5 billion of capital in excess of its requirements.
QBE is one of the 25 largest insurers and re-insurers in the world, and operates in nearly 50 countries. The company has consistently delivered results above market expectations ad has been lauded for adding value through the application of strict investment criteria to over 75 acquisitions over the last decade.
However, the company has struggled recently as lower global interest rates have hurt investment returns and 2009 results fell short of market expectations.
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