QBE shares jump after buy

SYDNEY - Shares of QBE Insurance Group, the second-biggest underwriter in the Lloyd's of London market, rose to a record after it agreed to pay A$272 million ($302 million) for ship insurer British Marine Holdings.

British Marine, which insures more than 8000 small ships in 80 countries, has annual sales of A$175 million, Sydney-based QBE, Australia's largest property and casualty insurer, said yesterday. The price paid for the Bermuda-based insurer is 1.7 times net tangible assets of A$160 million, QBE said.

Shares in QBE closed 40Ac, or 2.2 per cent, higher at A$18.32.

It is Australia's best-performing insurance stock this year, rising 19 per cent, compared with a 4 per cent gain in the seven-member S&P/ASX 200 Insurance Index.

QBE chief executive Frank O'Halloran said last month he was examining 15 potential acquisitions to boost premium income as rising competition cuts the profitability of policies. The purchase is the company's biggest since it bought ING's half-stake in an Australian venture for A$765 million in May 2004.

"Announced operational improvements, together with potential acquisitions, should support earnings growth into 2006," Morgan Stanley analyst Domenico Giuliano said in a report last week. He rates QBE "equal-weight" with a 12-month stock price target of A$17.25.

In July, QBE bought a unit of White Mountain Insurance Group, adding car, commercial, homeowner and farm owner businesses in nine Midwest US states, boosting annual premiums in North America and South America to about US$1.4 billion.

QBE earns about half its premium income at Lloyd's of London, the world's biggest insurance market, and in Europe.

- BLOOMBERG