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Date Published : Thursday, August 14, 2008
Insurance group QBE has signed a definitive agreement to acquire one of Australia's largest providers of home loan insurance to the country's major banks and lenders.
QBE will pay just over $1 billion for the Australian, New Zealand and Asian operations of US-based group PMI, it has announced.
People with a mortgage in Australia may not immediately know the name PMI but it writes around 40 per cent of the country's residential mortgage insurance market.
The businesses being acquired are expected to generate gross written premiums of around $200 million in 2008 and QBE's chief executive officer Frank O'Halloran has said the purchase is in line with "QBE's strategy of diversification".
"PMI has a 40-year track record of consistent profitability in lenders residential mortgage insurance. In the 15 years to June 2008, which includes two significant downturns in the Australian housing market, gross incurred claims were $345 million against gross earned premium of $1.68 billion," he furthered.
Any consumers that have insurance cover with QBE have been assured that it has enough measures in place to safeguard itself from any potential losses it may incur through the transaction, should there be a 'perfect storm' involving a significant rise in unemployment, a spike in interest rates and a sizeable downturn in property markets.
In May, QBE withdrew from discussions to merge with IAG after the board rejected its proposal. In its official press release, QBE reported that its "final proposal on price was well short of IAG's expectations".
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