The California-based PMI Group announced that it has entered into a definitive agreement to sell its Australian mortgage insurance subsidiary and related Australian holding company to QBE Insurance Group Limited, Australia’s largest international general insurance and reinsurance group.
PMI said the transaction would enhance its “overall liquidity and support opportunities for its U.S. mortgage insurance operations.”
PMI gave the following details concerning the transaction: “The purchase price is approximately 100 percent of the net tangible asset value of PMI Australia under U.S. GAAP as of June 30, 2008. The aggregate purchase price payable upon closing is approximately $920 million, subject to adjustment under certain limited circumstances, including in the event of a material adverse change in PMI Australia’s business prior to closing.
“The purchase price will be payable 80 percent in cash at closing and 20 percent payable in the form of an interest-bearing promissory note issued by QBE. The promissory note matures and is payable in September 2011, and the actual amount payable on the note could be reduced to the extent that the performance of PMI Australia’s existing insurance portfolio as of June 30, 2008 does not achieve specified targets.
“Interest will be accrued from July 1, 2008 for the cash component of the purchase price until the closing of the transaction and through September 2011 for the note. In connection with the transaction, PMI will also fund premiums of approximately $46.5 million to assist in procuring an excess of loss reinsurance cover for PMI Australia. The agreement provides for reinsurance profit sharing for one-half of the reinsurance premiums at the end of the three-year policy life, subject to certain conditions.”
Chairman & CEO Steve Smith described the sale as a “strategic move that will benefit both companies. PMI Australia’s customers will benefit from the financial strength, expertise, and operational excellence of QBE, and PMI Australia’s employees will gain the scale and resources QBE will bring them to expand and grow their business in Australia.”
He added that he is proud of the success PMI’s business has had in Australia, but indicated that the sale “also represents an important step in our five-point plan for progress, specifically maintaining our financial strength and focusing on our core U.S. mortgage insurance business.”
Source: The PMI Group, Inc. – http://www.pmigroup.com
Topics USA Reinsurance Australia
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