AUSTRALIAN INSURER QBE PAYS US$565 MLN FOR US-BASED INSURANCE CO

Australia's QBE Insurance Group Ltd (ASX:QBE) has bought a US-based insurance business for US$565 million and says the acquisition will be earnings per share accretive in year one.

QBE said on Friday that it had bought NAU Country Insurance Company, a multi-peril crop insurance business headquartered in Ramsay, Minnesota, with offices in the US midwest and in California.

Net tangible assets acquired will be US$217 million, the Sydney-based QBE said in a statement.

Multi-peril crop insurance is a US government sponsored program to assist farmers with insurance of crops, QBE said.

NAU was the third-largest insurer in that sector with about an 11 per cent market share.

QBE chief executive Frank O'Halloran said the acquisition was in line with the company's long-term strategy of acquiring specialist businesses to enhance the company's diversification and distribution.

"Synergies are expected from savings in reinsurance costs and cross selling of QBE's various agricultural insurance products to NAU's client base," Mr O'Halloran said in the statement.

"The purchase price relative to book value reflects the high quality of NAU's underwriting and management business."

In 2009, NAU wrote US$976 million of gross earned premium, while net earned premium was US$354 million, QBE said.

Profit after tax was US$92.5 million.

"The substantial majority of the 2010 profits will be earned in the second half of the calendar year," Mr O'Halloran said.

The deal was expected to be completed by July 2010.

QBE said it expected earnings per share growth of three to four per cent in year one, subject to the usual caveats such as catastrophes not exceeding allowanceS in the company's business plan.

The deal, which is subject to regulatory approvals, will be funded by cash and short-term borrowings.

NAU senior management, including the president and chief executive, have committed to remain with the company for at least two years, QBE said.

In February, Mr O'Halloran told investors at QBE's full-year earnings presentation that the company had A$2.5 billion (US$2.334 billion) available for acquisitions and was pursuing opportunities.

And at the company's annual general meeting last month, Mr O'Halloran said QBE had a "considerable pipeline" of acquisition and distribution opportunities in overseas markets.