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News of CBA’s potential divestment of its general insurance unit has sent the industry abuzz with speculation of interest from major industry players, including QBE Insurance Group, Allianz, and IAG.
In a report, a financial advisory services company has offered insights on whether an acquisition of CommInsure General Insurance by Australia’s largest global insurance company makes sense.
Motley Fool Australia said QBE “does not have a good track record of making successful acquisitions,” but noted that the insurance giant may just be the right buyer for CBA’s insurance business given that it is on its home turf.
“In February 2018, QBE announced that it was selling its Latin American operations to Zurich Insurance Group and exiting that region,” Motley Fool said. “While the sale was at a $100 million profit, QBE’s Latin American operations were running at a loss with a 2017 combined operating ratio (COR) of 113% and an insurance loss margin of 7%. The same applies to QBE’s Asia-Pacific operations (2017 COR of 115%) and Equator RE (2017 COR of 141%).”
Motley Fool suggested CommInsure is better suited to QBE “given that its operations are in Australia and New Zealand, an area which QBE has a very good understanding of.”
“QBE’s ANZ operations delivered a combined operating ratio of 92% in 2017 and an insurance profit margin of almost 13% in 2017,” it said.
But as “tempting” as the “once-in-a-lifetime” opportunity to acquire CommInsure is, Motley Fool said QBE should not let itself be distracted and should – as outlined in its last inventor presentation – focus on its goal of “simplifying QBE by narrowing the focus and returning to its core operations.”
