QBE to increase stake in Elders Insurance

The global insurer will increase its exposure to regional Australia.

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Struggling rural services provider Elders (ASX: ELD) has announced an in principle agreement with QBE Insurance (ASX: QBE) to sell down its equity holding in the Elders Insurance joint venture (JV) from 25% to 10%. As part of the agreement, use of the Elders brand will be extended until 2033, with Elders also maintaining a position on the board of the JV.

Elders stated that "proceeds from the sale will be used to further reduce term debt and facilitate additional working capital for the core rural services and trading business."

The further sell down to QBE almost brings to a close Elders' successful foray into the financial services space. The rural firm was unfortunately forced to progressively offload its share of the profitable Elders Rural Bank to Bendigo and Adelaide Bank (ASX: BEN) from 2009 and also sold its underwriting business and 75% of its agency business to QBE in 2009 as it struggled through the GFC with many poorly performing assets and under a mountain of debt.

It's been five years since Elders paid a dividend and QBE has been forced to dramatically reduce its dividends in recent periods too. Investors need to pick stocks carefully to ensure a dependable stream of dividends. Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

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Motley Fool contributor Tim McArthur owns shares in QBE Insurance.

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