QBE Prepares, Raises $1USb Debt Sale

QBE Insurance (ASX:QBE) raises $US1 billion in subordinated debt to maintain its balance sheet and fund its operations to fend off the impact of natural disasters. The company also prepares for insurance renewals in July when costs are bound to soar due to renegotiations.

Chief Frank O'Halloran is taking advantage of the improving confidence in credit markets. The debt raising is expected to be complete by May 24 at a fixed rate of 7.25 percent applied until May 2012, and a spread of 4.5 percentage points.

QBE said that their actual net claims may vary from the preliminary estimate, but the company has been able to back up its profit guidance so far.

The claims are consistent with industry losses - $US30 billion for Japan (excluding life assurance and the public sector of the Japan Earthquake Reinsurance), $US9 billion for New Zealand earthquake and $US5 billion for Australian floods.

QBE was also the first company to gain exposure to Japan with estimated net claims at $US125 million. The total catastrophe claim was $US550 million in the first three months of the year.

However, the company still has to get through the coming hurricane season in the US. Philip Klotzbach and Bill Gray, two experts at the Department of Atmospheric Science from Colorado State University that the insurance sector relies on, predicts above-average hurricane season this year with 17 big storms, nine hurricanes and five big hurricanes.