(Bloomberg) — QBE Insurance Group Ltd. plans to raise about $750million in a share placement and sell assets including part of itslenders' mortgage insurance business in Australia after reportingan 18% drop in earnings.

The insurer, which earns about three quarters of its premiumsoutside Australia and New Zealand, will sell $600 million in sharesto institutions and raise about $150 million through a sharepurchase plan, it said in a regulatory filing. QBE will also sellits U.S. agency business and seek partners for two Australianequivalents, it said. The proposals, along with a debt refinancing,will raise about $1.5 billion, chief executive officer John Nealsaid in a call with reporters.

“The measures by QBE aren't a bad way to plug the hole in thebalance sheet,” T S Lim, a Sydney-based analyst at Bell PotterSecurities Ltd., said by phone. “You can't have continuedwrite-offs without asset sales and capital raisings.”

QBE posted its first annual loss in 12 years in 2013 afterwritedowns in its North American operations. The Sydney-basedinsurer's share price has declined 7% this year, dragging itsmarket value lower than competitors Suncorp Group Ltd. andInsurance Australia Group Ltd.

Net income dropped to $392 million for the six months ended June30 from $477 million a year earlier, in line with its forecast July29, the insurer said today. Last month, QBE boosted its LatinAmerica claims reserve by $170 million due in part to increasedworkers' compensation claims in Argentina.

2015 IPO

The company plans to sell shares in QBE Lenders MortgageInsurance Ltd. through an initial public offering in 2015. Theunit, acquired in 2008, had net tangible assets of about $1.2billion as at June 30, QBE said. It's the nation's second- largestmortgage insurer by premium income behind Genworth MortgageInsurance Australia Ltd., according to data from AustralianPrudential Regulation Authority.

Genworth raised A$583 million in May in an initial publicoffering. Its shares have risen 36% since listing.

QBE will finalize the sale of its Central and Eastern Europeanoperations as part of its sale of non-core assets, the insurersaid.

“Companies such as Suncorp have demonstrated that sellingnon-core assets helps lift returns in the long run,” Lim said. “QBEhas finally realized that they have too many operations around theglobe.”

Balance sheet

QBE made more than 135 acquisitions since 1982 and hasoperations across 43 countries, according to its website. Suncorpsold non-core assets such as real estate unit LJ Hooker and theRACQ insurance joint venture in the year to June 2010 and split itsbanking arm into core and non-core the previous year, according toa regulatory filing.

The capital raising and asset sales are “intended tosignificantly improve our capital strength and balance sheetresilience,” QBE's CEO Neal said in the statement. The measureswill support “more predictable and sustainable earnings forshareholders.”

The insurer will also repurchase and cancel $500 million ofconvertible subordinated debt using the proceeds of the capitalraising, it said in today's statement.

Following a review of its investment strategy, QBE will extendits risk-asset exposure to around 15% of its portfolio from about2% as at Dec. 31. It will also extend the duration of itsfixed-income assets to three years from about six months.

Profit falls

The insurer's gross written premium fell 10% in the six monthsthrough June to $8.5 billion, mainly due to declines in Europe andNorth America. It expects full-year gross written premium of $16.6billion to $17.0 billion.

QBE will pay a 15 Australian cent interim dividend per sharerepresenting 42% of the half year profit and down from 20 cents ayear earlier. The shares are on a trading halt today.

Sydney-based competitor IAG posted a 59% increase in net profitto A$1.23 billion for the year ended June 30 on higher investmentincome, the insurer said in a regulatory filing today. Suncorpreported a 49% increase in full-year net income last week.

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