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Shareholders attend the Fairfax Financial Holdings annual general meeting in Toronto on April 9, 2014.Nathan Denette/The Canadian Press

Fairfax Financial Holdings Ltd. is expanding its reach into Europe's financial sector with an acquisition of three Eastern European property and casualty companies from Australia's largest insurer.

Toronto-based Fairfax, which owns a variety of insurance and reinsurance companies, agreed to acquire subsidiaries in the Czech Republic, Hungary and Slovakia from Sydney-based QBE Insurance Ltd. The companies did not disclose the value of the transaction, but the three divisions have combined premium income of more than $40-million (U.S.). The insurance divisions primarily sell property, casualty and travel insurance to commercial customers.

Fairfax has been an active investor in distressed banks in Ireland and Greece in recent years on the bet that core assets were excessively undervalued in the wake of the financial crisis. The latest acquisition is a variation on the strategy. This time it is the seller, QBE Insurance, that is in distress.

After an acquisition spree that saw QBE acquire more than 40 insurance companies throughout Europe in the 2000s, the company has struggled with declining profits and pressure to boost its regulatory capital levels in difficult markets.

Paul Rivett, Fairfax's president, said the company was drawn to the QBE's Eastern European operations because insurance competition is limited in the three countries.

"This represents another opportunity for Fairfax to grow in a region we haven't been before," Mr. Rivett said.

Fairfax watchers will notice another twist in the QBE Insurance deal. Fairfax founder Prem Watsa prides himself in negotiating and structuring financing and takeover terms inhouse. This time, Scotia Capital gets a nod for the transaction after its advisors alerted Fairfax about potential asset sales at QBE Insurance.