Friday, February 04, 2011
QBE has entered into an initial ten year distribution agreement
with Bank of America for lender placed and voluntary homeowners,
contents, motor and other related consumer lines and associated
services. Lenders' mortgage insurance is not included. As part of
the agreements, QBE will assume the outstanding claims and unearned
premium liabilities of Bank of America's wholly owned subsidiary,
Balboa Insurance Company and affiliated entities in return for
matching assets ("portfolio transfer"). The agreements, which are
subject to regulatory approvals, are expected to be completed in
the second quarter, with the portfolio transfer effective on 1
April 2011.
QBE estimates that the annualised gross earned premium and net
earned premium from the distribution agreement will be around
US$1.5 billion and US$1.3 billion respectively. We expect
that the annualised insurance profit margin before tax, after
catastrophe allowances, amortization of cost of the distribution
rights and portfolio transfer and the expenses of distribution,
will be slightly higher than that currently achieved on QBE's
worldwide net earned premium and within the range of 15% to 20% of
net earned premium.
The agreements involve the following:
1. the assumption of insurance liabilities of Balboa and its
affiliates of approximately US$1.2 billion matched by tangible
assets of an equivalent amount; and
2. the upfront payment to Bank of America of US$700 million for
the distribution rights and the portfolio transfer, which will be
substantially amortised in the first three years.
The funding of the distribution rights payment initially will be
from new short term bank facilities which are intended to be
replaced at the appropriate time by Tier 2 debt securities
acceptable to regulators and ratings agencies. The expected profits
for 2011 and reinvestment of the 2010 final dividend through
dividend reinvestment and a dividend underwriting arrangement will
preserve the existing capital adequacy.
Mr. Frank O'Halloran said "The distribution agreement with Bank
of America in the US and the portfolio transfer provide QBE with a
specialist personal lines portfolio which is complementary to the
Sterling National business acquired in 2008. QBE's business in the
US will now be made up of five major segments, namely, lender
placed and voluntary homeowners, contents and motor primarily
through financial institutions (GWP of US$2.1 billion), specialty
insurance programmes (US$1.5 billion), crop insurance (US$1.2
billion), regional agency and broker (US$1.3 billion) and
reinsurance (US$0.5 billion)."
He added "QBE's strategy in the US of specialisation for the
majority of business has enabled it to outperform the market in
recent years, with 2010 producing a preliminary combined operating
ratio of 89.7% and a 19% increase in underwriting profit to US$309
million. We now have sizeable market shares in the lender placed
homeowners, specialty insurance programme and crop sectors."
For further information, please contact:
Investor Relations
Tel: +612 9375 4636
investor.relations@qbe.com
QBE Insurance Group Limited
ABN 28 008 485 014
82 Pitt
Street
SYDNEY NSW 2000
Australia
Media Enquiries
David Symons
Tel: +61 [0] 410 559 184
mediaenquiries@qbe.com
QBE Insurance Group Limited is listed on the Australian
Securities Exchange, is recognised as one of the top 25 global
insurance and reinsurance companies as measured by net earned
premium and has operations in 49 countries.
Additional Information
Bank of America
Bank of America is one of the world's largest financial
institutions, serving individual consumers, small- and
middle-market businesses and large corporations with a full range
of banking, investing, asset management and other financial and
risk management products and services. The company provides
unmatched convenience in the United States, serving approximately
57 million consumer and small business relationships with more than
5,800 retail banking offices and approximately 18,000 ATMs and
award-winning online banking with 29 million active users. Bank of
America is among the world's leading wealth management companies
and is a global leader in corporate and investment banking and
trading across a broad range of asset classes, serving
corporations, governments, institutions and individuals around the
world. Bank of America offers industry-leading support to
approximately 4 million small business owners through a suite of
innovative, easy-to-use online products and services. The company
serves clients through operations in more than 40 countries. Bank
of America Corporation stock (NYSE: BAC) is a component of the Dow
Jones Industrial Average and is listed on the New York Stock
Exchange.
Balboa Insurance Group
("BIG")
For over 60 years, BIG has provided risk management and loss
mitigation solutions to financial institutions in the mortgage and
auto finance industries.
On 1 July 2008, BIG's former parent, Countrywide Financial
Corporation, was acquired by Bank of America. On 1 January
2009, all BIG entities became part of Bank of America Insurance
Group.
BIG is licensed in all 50 states with the exception of
Louisiana, where it is licensed for surplus lines only. BIG
is headquartered in Irvine, California.
Companies in the BIG general insurance group:
- Balboa Insurance Company
- Meritplan Insurance Company
- Newport Insurance Company
- Newport E & S Insurance Company
- Balboa Warranty Services Company
Lender Products
- Lender Placed Insurance Programs
- Lender placed flood and flood gap
- Lender placed fire
- Lender placed wind and hailstorm
- Real Estate Owned property and liability coverage
- State of the art insurance tracking
- Auto Risk Mitigation
- Collateral Protection Insurance (for the lender in the event no
other insurance is in place at the time of the loss)
- RepoSource (proprietary insurance recovery program)
- TrackSource (proprietary insurance process flow tracking
system)
Consumer Products
- Homeowners Insurance
- Renter Insurance
- Automobile Insurance