News 2008

QBE INSURANCE GROUP LIMITED
ABRIDGED MARKET ANNOUNCEMENT **
QBE ANNOUNCES ACQUISITIONS AND UPDATED REVENUE FORECASTS

November 26, 2008

THIS MARKET ANNOUNCEMENT OUTLINES:
• a number of acquisitions, the largest being ZC Sterling Corporation (“ZCS”)
• an upgrade of 2008 and 2009 premium revenue expectations, including the positive impact of the lower Australian dollar and acquisitions

ACQUISITIONS

i) QBE Holdings Inc has entered into an agreement to purchase ZCS, a US based underwriting agency for an up-front payment of US$575 million. ZCS specialises, and has sizeable market shares, in:
• property insurance to protect the lender in the event that the original homeowners’ insurance policy is either cancelled or not renewed; and
• voluntary homeowners’ insurance through relationships with homebuilders, mortgage originators and real estate brokerage firms.

ZCS is not involved with lenders’ mortgage insurance.

ZCS earns commission revenue on the insurance policies placed with insurers. QBE’s acquisition of ZCS provides access to both the agency income and underlying insurance business. The ZCS acquisition is expected to generate additional gross written premium for QBE of around US$425 million in 2009 and US$575 million in 2010.

ii) QBE has also reached agreement to acquire two further underwriting agencies in the US and one in Europe and also a renewal rights portfolio in the US. Additional gross written premium is expected to be US$100 million in 2009.


In the first full year, the five acquisitions are expected to produce gross written premium of close to US$525 million and profit after tax of around US$175 million. The initial purchase price for all the acquisitions is around US$695 million.

 

GROUP REVENUE FORECASTS


For 2008, the targets advised to the market in August have been upgraded to 7.5% growth in gross written premium or A$13.3 billion and 10% growth in net earned premium or A$11.2 billion if the value of the Australian dollar continues at current levels for the remainder of the year.

For 2009, based on an average Australian dollar exchange rate equal to US 70 cents and Sterling 40 pence and anticipated organic growth and acquisitions in 2008, gross written premium is expected to be around A$16.5 billion and net earned premium A$14.0 billion. Net earned premium for 2009 is targeted to increase by 25% compared with our 2008 forecast.

With around 80% of QBE’s gross written premium in currencies other than the Australian dollar, the weaker Australian dollar, particularly compared with the US dollar and Sterling, has had a significant positive impact on QBE’s premium income.

Mr Frank O’Halloran, Chief Executive Officer, said “The acquisition of the four underwriting agencies and the renewal rights portfolio is consistent with our strategy to build our distribution channels for profitable niche products. Based on our projections, the acquisitions will be earnings per share accretive in year one.”

 

For further information, please phone +61 2 9375 4226 or email investor.relations@qbe.com
26 November 2008
** Abridged due to US securities law