Elders’ clawback of its valued insurance business is gaining ground with the farm services company now back to owning 20 per cent of Elders Insurance Underwriting Agency Limited (EIUA).
It has just completed a second 10pc purchase of the insurer from QBE Insurance, which still owns the remaining 80pc.
QBE came to the rescue to buy the insurance arm over a five-year gradual process when Elders was in dire financial strife in 2009, floundering with a $1.4 billion debt after the global financial crisis hit.
In June 2014 it quit the last of its stake in the partnership for $18.2 million, although the Elders insurance name remained and Elders’ branch network continued to be franchise agents for the insurer.
However, in April this year the 176-year-old Elders began buying back in, taking 10pc and last week doubled the size of its holding.
The purchase was based on the same net profit after tax multiples which applied when it sold its shares in EIUA in 2014.
The purchase price remains confidential.
The deal has been funded from available cash reserves.
Elders has insurance franchisees in more than 150 metropolitan and rural locations in Australia.
Elders’ chief executive officer, Mark Allison, said the company identified its financial services businesses as an area of “growth
Potential” and accordingly, we had prioritised this acquisition.
The agency business also bought 30pc of vendor finance business StockCo Holdings in October for the same reasons.
He said a bigger ownership of EIUA better aligned the insurance business and Elders’ networks and delivered a more meaningful share of the insurance company’s profits to Elders bottom line
“Elders now has the ability to deliver
greater insurance earnings to its branches, which in turn will encourage greater levels of engagement and cross-sell between Elders and EIUA,” he said.
“We look forward to EIUA increasing its share of rural and regional insurance markets through the efforts of its franchisees, Elders and QBE.”
After hitting highs around $4.70 early this year, then sliding back, Elders’ share price has also been in recovery mode in the past six months, peaking at $4.06 in October and holding around $4 in recent weeks.
The company holds its annual general meeting in Adelaide on December 16.