QBE Considering a Sale of U.S. Underwriting Business

MELBOURNE-- QBE Insurance Group Ltd. is considering selling its underwriting business in the U.S. in an effort to return its North American division to profit after being hit by hefty claims in recent years.

The company, Australia's largest insurer by market value, said Monday it was considering, among other measures, refining the business strategy of its U.S. "middle-market" operation and selling all or part the business, which operates through a number of independent insurance agencies across the country.

"We continue to assess options for various components of the U.S. business," said John Neal, the Sydney-based company's chief executive. "The time is right to consider our longer term plans to maximize shareholder value."

The middle-market business under review represents around US$900 million in gross written premium for QBE, mainly property- and casualty-insurance business, the company said.

Central to the business is Winterthur, a company acquired by QBE in 2007 for US$1.16 billion to beef up its operations in the U.S. At that time, Wisconsin-based Winterthur had roughly US$1.45 billion in gross premium income.

News of the review weighed on QBE's shares, sending the stock down as much as 4%. Michael McCarthy, chief market strategist at CMC Markets, said the worry was that a sale could lead to further write-downs for QBE given the amount it had paid for Winterthur.

QBE posted a net loss of US$254 million for the latest financial year after its North American business was dented by US$1.33 billion in write-downs, restructuring costs and an increase in claims for previous years. In recent years, the U.S. business has struggled with crop-claims due to drought, the aftermath of superstorm Sandy and a jump in accident claims for past years.

The company a year ago appointed David Duclos to succeed John Rumpler as head of the North American division. Mr. Duclos put in place a new senior executive team.

The Insurance Insider, a publication based in London, on its website reported that QBE has begun interviewing advisers to handle the possible sale of its Winterthur unit.

A spokesman for QBE declined to comment on the report.

David Ellis, an analyst at Morningstar in Sydney, said he didn't expect a sale of any of the U.S. businesses to be agreed on before QBE had completed its review.

Write to Robb M. Stewart at [e-mail]

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