QBE Insurance Group Ltd. announced Tuesday that it is selling its U.S. agency businesses to California-based Alliant Services Inc. for about $300 million and exiting the distribution business.
The agencies that Alliant is acquiring are Community Association Underwriters (CAU), Deep South and SIU Managers.
In a statement released by QBE, CEO John Neal said the sale comes with a long-term agreement to retain the underwriting business provided by the agencies.
Alliant, one of the largest insurance brokers in the U.S., will make an upfront cash payment of $217 million, and pay the remainder over the next five years.
The sale of the three agency businesses was not a surprise. After QBE’s profit declined 18 percent in the first half of last year, the Australia-based insurer began implementing a strategic plan to raise about $1.5 billion through the sale of assets and an initial public offering of its Australian mortgage insurance unit.
In August, Neal confirmed QBE’s plans to sell the agency business while hanging onto middle market business in North America during a second-quarter earnings conference call.
During an interview with Carrier Management at the PCI Annual Conference in Scottsdale in October, David Duclos, chief executive officer for QBE North America, again confirmed that its three agencies in the U.S. were up for sale.
“The U.S. agency business for QBE North America is three different MGAs that were purchased over the past 10 years. They specialize in very unique niche product capabilities. One is transportation related, one is property-cat and then the other is one of the largest condominium insurers in North America,” Duclos said.
“We’re simply selling the distribution or the agency itself because we’re focused solely on becoming very good underwriters,” he said. “Distribution for us is a bit of a distraction, and frankly, we’re not able to leverage and optimize the value. We don’t really understand how to distribute.”
He said QBE’s objective was to sell the agencies to a strategic partner that could “leverage the product capabilities and sales platform in a much more effective way” while QBE continued to be the underwriter.
The sale is part of QBE’s ongoing efforts to get back on track financially.
In mid-December, QBE inked a deal to sell its insurance operations in the Czech Republic, Hungary and Slovakia to Fairfax Financial Holdings Ltd. for an undisclosed price.
Headquartered in Newtown, Pa., CAU offers insurance coverage specific to the needs of community associations in 30 states.
Deep South, a managing general agency with offices in Texas, Louisiana and Colorado, serves transportation and other commercial risks.
QBE owns SIU Managers of California. It is that agency that is being sold, according to Guillermo Gonzalez, agency president.
Southern Insurance Underwriters Inc. (SIU), based in Georgia, is and will continue to be owned and managed by members of the Duesenberg family of Atlanta, according to the firm.
S.I.U., LLC is a managing general underwriting facility formed in 1999 to underwrite and manage select commercial and specialty business, located in Glendale, Calif.
“We are pleased to announce the progression of another important step of our capital plan in the sale of the U.S. agency businesses at a price we consider to be attractive for our shareholders,” Neal said in a media statement about the sale.
The planned sale price represents about 12 times earnings before interest, tax, depreciation and amortization, QBE said.
The sale is expected to close in early February 2015.
Last week, A.M. Best upgraded the ratings for QBE Insurance Group’s operating subsidiaries in the United Kingdom, Australia and North America, reflecting a positive response to the company’s ongoing revamp. A.M. Best said the change reflects QBE’s efforts through 2014 to improve its capital situation, reduce debt and reorganize.
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