Global insurer QBE is stalking the commercial insurance operations of Dutch financial services company ING as it seeks to ease investor concern about slipping underwriting profits that caused a sharp decline in its share price yesterday.
The insurer has formally lodged its interest in the financial-crisis-inspired break-up that ING is undertaking of its worldwide business. ING's global insurance arm is expected to be sold early next year.
ING's commercial insurance operations are within its larger life insurance division and must be separated out before bidders such as QBE can make a clear-cut offer.
ING received a €10 billion government bailout in November 2008, designed to help the banking, wealth management and insurance company overcome its exposure to toxic assets on its crisis-weakened balance sheet.
As part of the deal, ING agreed to concentrate on banking, raise new funding and sell capital-hungry or unwanted businesses.
One of those was its Australian wealth management business, which was acquired by its joint-venture partner, ANZ, for $1.76 billion in September.
QBE chief executive Frank O'Halloran told investors yesterday that the company had $2.5 billion available to fund further acquisitions and was chasing several opportunities that he did not identify.
But asked by BusinessDay about ING, Mr O'Halloran - who has overseen more than 100 purchases - confirmed that its ''non-life insurance'' operations were now in his sights.
Having missed out on the Belgian insurer Fortis last year, QBE's expansion has been partly hampered by a lack of crisis-related casualties.
''It is surprising that there aren't as many opportunities around at the moment,'' Mr O'Halloran said.
ING confirmed last week at its annual results that it was on track to create its new standalone businesses by the end of the year.
But it is determined to get a good price for its various insurance operations by avoiding a quick fire sale.
Mr O'Halloran expressed a desire to increase the group's revenue by purchasing gross written premium through acquisitions, given that business being written by many of its global competitors was effectively at cost or unprofitable.
Such moves would only hit net insurance profit, and QBE was yesterday forced to defend a drop in its underwriting margins for the year ending December 31.
These came in at 17 per cent of its revenue, which was at the lower end of market expectations and 270 basis points below the 2008 result.
Concern about its performance and its modest growth targets for the coming year caused the company's shares to slump $1.60, or 7 per cent, to $21.40.
The shares have dropped 15 per cent since the start of the year.
Falling returns on its investment portfolio caused by the worldwide drop in interest rates undermined the margin and profit performance, while the strong Australian dollar held back revenue growth.
QBE's insurance profit dropped $120 million to $2.06 billion.
Its combined operating ratio - the key measure of claims, commissions and expenses compared with net earned premium - also rose slightly to 89.6 per cent from 88.5 per cent.
But gross written premium was up 10 per cent to $14.46 billion, while net profit rose 6 per cent to $1.97 billion, partly due to lower crisis-related and bad-weather claim payouts, and a $106 million drop in the global tax bill.
QBE declared a final dividend of 66¢, taking the total dividend for the year to $1.28, an increase of 2¢.
QBE
Net profit $1.97 billion +10%$1.95 -5.7% $14.4 billion -5.7%$1.28+1.5%
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