Praetorian currently reinsures half of its business through quota share agreements to Hannover Re and its affiliates. QBE said it intends to cancel these arrangements at closing and inject approximately $200 million of additional capital into Praetorian.

Hannover created Praetorian to assume the renewal business of Clarendon Insurance Group, which assumed runoff and some commodity business.

QBE said Praetorian is expected to have a combined operating ratio of 78.1 percent for the year.

“We have been fortunate to secure an excellent insurance business in the U.S. which is highly complementary to our existing profitable specialist insurance program business,” said Frank O'Halloran, QBE Group's chief executive officer, in a statement.

“The acquisition,” said Mr. O'Halloran, “meets QBE's established criteria; in particular, earnings per share accretive in year one. Subject to no unforeseen circumstances, we anticipate profit after tax of $150 million in the first full year before the cost of funding the acquisition, the capital injection and synergies.”

“The acquisition is consistent with our strategy of building our specialist insurance program business while focusing on small- to-medium regional markets of the U.S.,” said Mr. Kenny. “It follows the successful acquisitions of National Farmers Union in 2005 and the One Beacon Agricultural division earlier this year.”

Wilhelm Zeller, CEO of Hannover, said the sale demonstrates his company had the right strategy to carve out its U.S. primary specialty business into Praetorian, and that it has found a “sound strategic partner” for Praetorian in QBE.

Hannover said it intends to redeploy the capital freed up by the transaction to its core property-casualty and life-health reinsurance business.

Standard & Poor's said its rating of Hannover (double-A-minus/Negative) remained unchanged and that it viewed the transaction favorably. However, it called the resulting reduced diversification of earnings a “mildly negative aspect of the transaction.”