(Updates with plans for partial float of mortgage insurance
business, capital raising, outlook)
SYDNEY Aug 19 QBE Insurance Group,
Australia's biggest insurer by premium income, announced plans
to partially float its mortgage insurance business and a $750
million capital raising as it posted an 18 percent drop in
first-half net profit.
QBE, which has been grappling with hefty claims because of a
range of adverse weather events in North America, plans to cut
$500 million of convertible subordinated debt through the $750
million share placement.
It also plans asset sales and a partial share offer next
year of mortgage insurer QBE LMI, which had $1.2 billion in
assets at the end of June.
The company will raise $700 million in Tier-II debt, mainly
to replace senior debt.
"When executed, these initiatives deliver significant
additional cash and capital resources that will substantially
improve the group's financial flexibility and ability to better
withstand a reasonable range of downside scenarios," the insurer
said in a statement.
The Sydney-based company expects its debt-to-equity ratio to
fall as a result of those steps to its targeted range of 25
percent to 35 percent from 38.4 percent now.
QBE said its net profit after tax for the six months ended
June 30 was $392 million, in line with a profit warning issued
last month, and down from $477 million a year ago.
The results were hit by higher claims in Argentina, crop
damage in Latin America, UK floods and storms in North America
American casualty insurers Chubb Corp and Travelers
Cos Inc were also hit hard by bigger catastrophe losses
in the June quarter.
Severe storms pounded parts of the central United States in
early June, producing baseball-sized hail. There were also
several tornadoes and other dangerous wind storms.
QBE reported an insurance profit margin of 7.6 percent in
the first half, compared with 10.8 percent a year ago. It
expects that to rise to 8 percent to 9 percent at the end of the
The group is facing a class action from shareholders over
its profit downgrade for fiscal-year 2013.
Its shares are down nearly 7 percent for the year to date,
compared with a 4.4 percent increase in the benchmark S&P/ASX
(Reporting by Swati Pandey; Editing by Jane Wardell, G Crosse
and Jan Paschal)