QBE linked to £150m Brit deal

QBE has become the latest insurer to be linked with a potential deal for Brit’s UK arm.

QBE has been touted as a potential bidder likely to line up against acquisitive French mutual giant Covea and Ageas, which are also rumoured to be in the race for the UK business.

Lloyd’s largest private insurer Canopius is also expected to take a look at Brit, although it may be wary of making such a heavy foray into the ferociously competitive UK commercial market.

The first round of bidding is expected to close tomorrow, with expectations that the business could go for as much as £150m.

QBE has previously talked big about becoming a top five player in UK property and acquiring Brit would certainly boost its market share.

Brit’s UK regional book was worth £441.2m gross written premium last year.

Brit historically has written around half of its UK business in property and commercial combined. By that logic, an acquisition by QBE’s would boost its UK regional property book by at least £200m gross written premium.

UK property head Ash Bathia would almost certainly play key role in harnessing the full benefits of a newly-acquired Brit UK business.

The Australian-based insurer has shown great belief in Bathia, promoting him to a wider role last year overseeing UK property.

QBE Insurance Europe Limited (QIEL) wrote just under half of its £1.28bn premium last year in the UK and notched up a combined operating ratio of 106%.

A merger with Brit’s UK business, which posted a 99.8% combined operating ratio, may bolster the combined operating ratio performance of QIEL over the long-term.

Another plus point is that Brit has also massively scaled back in personal motor over the last two years, which would suit QBE, which officially exited UK specialist personal lines motor at the start of last year.

QBE still has a large commercial fleet motor book which it has no intention of withdrawing from.

Around Lloyd’s, the decision to sell Brit has raised few eyebrows.

One senior director ruled his company out of the bidding, pointing to Brit UK’s low return on equity (ROE) and its propensity to consume a lot of resources.

The UK arm was a drag on the wider Brit group’s ROE, something which would not have gone unnoticed by its new private equity owners, he said.

The Brit sale is being handled by Evercore Partners. They have been told to find a buyer following the £888m takeover by Achilles Netherlands Holdings BV in the summer.

QBE, Brit and Apollo, the main shareholder of Achilles, declined to comment.