QBE Plans Asset Sales As It Announces An 18% Fall In Net Profit

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QBE’s net profit fell 18% to US$392 million in the six months to June 30 as gross premiums fell 10% to $8.491 billion mainly due to performance in Europe and North America.

The insurer plans a round of capital raising, a float of its mortgage insurance business and asset sales.

CEO John Neal says the group’s results are solid except for Latin America.

“The necessary reserve strengthening in our Latin American Operations is frustrating; however, we acted decisively to put this issue behind us,” he says.

“I look forward to continued improvement in performance across the remainder of 2014.”

QBE plans to sell some non-core asset sales to significantly improve balance sheet resilience.

Neal says operational transformation program is on track.

“This and the proposed capital initiatives will substantially improve the financial strength of the group, supporting more predictable and sustainable earnings for shareholders,” he says.

The plan includes:

  • An equity raising of approximately US $750 million (about A$810 million), the proceeds of which will primarily be used to repurchase and cancel the remaining US $500 million of
    convertible subordinated debt.
  • Asset sales including a joint venture structure for two of the Australian agency businesses, the sale of its US agency businesses and finalisation of the sale of Central and Eastern
    European operations.
  • The partial IPO of QBE LMI (Lenders Mortgage Insurance), targeted to occur in 2015. The net tangible assets of QBE LMI are $1.2 billion.
  • A US $700 million issue of qualifying Tier 2 borrowings, primarily to replace senior debt.
  • Removal of the 1% discount on the group’s dividend reinvestment plans.

QBE has equity raising of $750 million (about A$810 million) from institutions and from a share purchase plan outside the United States to raise $150 million (A$160 million).

The insurer is in a trading halt today while it finalises institutional equity raising which will be used to retire US $500 million in convertible subordinated debt.

The results in detail:

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