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Issue 97 - 16th April 2010
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QBE harvest US Crop underwriter deal
QBE Insurance Group has announced that it has agreed to acquire crop insurer NAU Country Insurance Company for $565 million. NAU is a leading underwriter and manager of multi-peril crop insurance business in the US, with completion of the deal expected in July. QBE’s Chief Executive Officer, Frank O’Halloran said “The acquisition is in line with QBE’s long term strategy of acquiring specialist businesses to further enhance our significant product diversification and distribution. NAU is a very well managed and profitable crop insurance provider in the US with excellent systems. Synergies are expected from savings in reinsurance costs and cross selling of QBE’s various agricultural insurance products to NAU’s client base.” He added “The purchase price relative to book value reflects the high quality of NAU’s underwriting and management business and the fact that the substantial majority of the 2010 profits will be earned in the second half of the calendar year.” Last year In NAU wrote $976 million of gross earned premium. Net earned premium was $354 million, the combined operating ratio, was 61.3% and profit after tax was $92.5 million. NAU is the third largest writer and manager of Multi-Peril Crop Insurance (MPCI) in the US. MPCI is a Department of Agriculture program that provides protection against weather-related and other unavoidable causes of crop loss. NAU operates 10 offices across the US and has over 1,600 independent agents. QBE revealed the purchase price is $565 million and the net tangible assets acquired will be $217 million. The insurance group said the acquisition will be funded from existing resources and, “subject to catastrophes not exceeding the allowances made, will be earnings per share accretive in year one”.
Energy market off to Bahrain - Hopefully!!!
Broker Aon is hosting its 10th Middle East Energy Conference in Bahrain next Monday and will be hoping the Iceland volcanic ash clears in time for the International contingent from the UK, Europe and the US will be bale to make it. Magne Seljeflot, Chairman, Aon Energy, says the event comes at a time when the energy market is at a pivotal point. “The energy industry remains on the cusp of recovery and we are starting to see some exciting new projects get back off the ground after several years of mothballing. Working on making risks attractive to insurers is going to be key in making sure these and future projects are viable. At the same time, climate change, pricing and future energy policies are still very serious causes of debate and we hope to provide a valuable forum for companies, the insurance markets and regulators to get together and learn from one another.” The event will be opened by Rasheed Al Maraj, Governor of the Central Bank of Bahrain who said the insurance industry remained vital for the region and its future success. “The insurance sector is becoming an increasingly important part of Bahrain’s financial system,” he explained. “Firms are attracted to Bahrain by our comprehensive and transparent regulatory framework and use their presence as a hub from which to tap the opportunities of the wider Middle East. There remains an enormous potential for the energy insurance industry to offer specialist services and risk mitigation throughout the GCC and MENA region.”
Insurers will face rising demand from power firms – Hartwig
Energy seemed to be the topic of choice this week as Prague hosted AEGIS London’s European energy conference with a warning to the market that it can expect to see a huge demand for coverages as the world looks to invest trillions of dollars in new power generation facilities. Dr Robert Hartwig, President of the Insurance Information Institute, argued that rising demand for energy, fuelled in part by the development of economies like China and India, was driving the need for unprecedented levels of investment in global power generation infrastructure. Dr Hartwig put the investment bill for Europe alone over the next 20 years at US$1.351 trillion. Most of this money, he said, would be spent on power generation and distribution, with power transmission as the third priority. This will, according to Dr Hartwig, mean significant demand for energy insurance. He added part of the change that both insurers and generators will have to manage is the increasing use of electricity as opposed to other types of energy. In Europe, demand for electricity generation is rising by 1.5% per annum compared with 0.5% growth overall in all types of energy. Dr Hartwig explained: “Net electricity generation is rising faster than overall demand for energy. This is because of the net substitution of electricity for other sources of energy. For example, automobiles are now being driven by electric batteries – substituting away from gasoline. This change will have an enormous affect on energy generation all around the world. Global energy demand is rebounding. Renewed confidence in the economy is boosting energy demand and alongside it the demand for insurance. In the longer run, energy is a growth business both in Europe and globally.” He said that aggregate capacity was rising as capital was restored. Capital providers remained attracted to the energy sector, he argued, due to strong results from last year. However, an abundance of capital and the lack of major cats in 2009 had driven down prices, but the first quarter of 2010 has seen a very different loss profile emerging. Dr Hartwig concluded: “The first quarter 2010 was one of the worst in history for insured catastrophe losses. We’ve had a succession of major winter storms in the US and Europe combined with the Chilean earthquake. Given what we’ve seen so far, 2009 might have been light but the first three months of this year have changed the equation completely.”
Clinton visits broker to say thanks for Haiti support
Former US President Bill Clinton was in Lower Manhattan this week to thank broker contributing $408,000 for Haiti relief efforts as part of an online fundraising campaign. During ceremonies in the company’s offices at One World Financial Center, Willis Chairman and CEO Joe Plumeri praised the generosity of more than 2,000 Willis employees who participated in the five-week Willis Cause for Haiti Campaign, and whose contributions were matched dollar-for-dollar by the company. Nearly 200 of those employee-donors were on hand to witness the event, and to hear Mr. Plumeri and President Clinton speak about the progress of relief efforts in the earthquake-ravaged nation. “The response and generosity of the people of Willis is a tremendous example of the global outpouring of goodwill that has led more than 200,000 individuals to make contributions to the Clinton Bush Haiti Fund,” President Clinton said. “Through our Fund, which is assisting long-term recovery and rebuilding efforts on the ground, I have seen the remarkable resolve of the Haitian people to rebuild their homes, communities, and country back better than they were before the earthquake. With help from their neighbors and friends like the people of Willis, Haiti has a chance to reclaim its destiny.” Mr Plumeri added: “Throughout modern history, the insurance industry has helped to rebuild when calamity strikes. It was true after Northridge, during the Clinton Administration, and after Katrina, during the Bush Administration. In countries with limited insurance coverage, like Haiti, it falls to the generosity of individuals, companies, governments and NGOs to respond and rebuild. In Haiti, thanks to people who have stepped up from around the world, from Willis and other companies and groups, we have a real opportunity to turn disaster into hope."
Jon Guy
Editor
Global Broker & Underwriter
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