QBE Insurance Group Ltd. of Australia is selling its U.S. agency businesses to California-based Alliant Services Inc. for about $300 million and exiting the distribution business.
The agencies being bought by Alliant include Community Association Underwriters (CAU), Deep South Insurance Services and SIU Managers in California.
(Correction: SIU Managers is being sold and not SIU, or Southern Insurance Underwriters of Georgia. A previous version of this story was incorrect in reporting it was SIU being sold.
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.)
However, the deal allows QBE to retain the underwriting on the program business it has with the agencies for a “long-term” period.
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, according to the terms of the deal.
The sale of the three agency businesses was not a surprise. After QBE Group’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.
Related: QBE NA CEO Sets Record Straight on Middle-Market
David Duclos, chief executive officer for QBE North America, told Carrier Management in November 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 told Carrier Management. “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 Group’s objective was to sell the agencies to a strategic partner that can “leverage the product capabilities and sales platform in a much more effective way” while QBE continues 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.
Agencies Sold
Headquartered in Newtown, Pennsylvania, 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.
SIU Managers, a managing general underwriting facility located in Glendale, Calif., underwrites and manages select commercial and specialty business.
“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,” said QBE Group CEO John Neal in the announcement of the deal.
He said an “important element of the sale is the long-term agreement” that QBE entered into to retain the underwriting business provided by the agencies.
The executive leadership team of CAU, Deep South, and SIU Managers will continue to operate the company under their existing names. In addition, the client services and business development teams of the three companies will remain in place, according to the announcement.
“This acquisition marks a significant milestone in the continued expansion of Alliant’s MGA and program administrator business,” said Tom Corbett, chairman and CEO of Alliant.
Alliant said the QBE agencies will join its subsidiary Alliant Specialty Insurance Services (ASIS), the company’s MGA and program administrator. Under the leadership of President Sean McConlogue, ASIS partners with retail agents across the country to distribute its various products to middle-market clients.
The planned sale price represents about 12 times earnings before interest, tax, depreciation and amortization, QBE said.
On its website, QBE said this decision does not affect its accident and health platform, led by Bob Lang, its accident and health underwriting, or its middle market business led by Jeff Post.
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.
Related:
- QBE to Sell $750 Million in Shares, Some Assets as Profit Drops
- QBE Wins Time for Cleanup as Plan Reduces Risk: Australia Credit
- James Named President of P&C for QBE North America
Topics California USA Alliant Australia
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