OCTOBER 01, 2012 12:00 AM (EDT)
A.M. Best Affirms Ratings of QBE Insurance Group Limiteds U.S. Subsidiaries; Upgrades ICRs of Certain Subsidiaries
David Blades, CPCU
Senior Financial Analyst
(908) 439-2200, ext. 5422
Assistant Vice President
(908) 439-2200, ext. 5630
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - OCTOBER 01, 2012 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of a+ of the pooled and reinsured members of QBE North America Insurance Group (QBENA Group). A.M. Best also has upgraded the ICRs to a+ from a and affirmed the FSR of A (Excellent) of QBE Reinsurance Corporation, QBE Insurance Corporation (both domiciled in Harrisburg, PA), QBE Specialty Insurance Company (Bismarck, ND), NAU Country Insurance Company (Ramsey, MN) and Praetorian Insurance Company (Harrisburg, PA), which became members of the QBENA Group pooling agreement retroactive to January 1, 2012. As a result of the additional companies becoming members of the QBENA Group pooling agreement, the resulting Financial Size Category for the Group is XV. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)
All of the aforementioned companies are key parts of the ultimate parent, QBE Insurance Group Limiteds (QBE) (Australia) expansion of its operations in the United States. QBENA Group is a significant contributor to the worldwide operations of QBE, one of the largest global insurance organizations, representing approximately 37% of QBEs global business.
The rating actions consider the explicit and implicit support provided by QBE and its affiliates, including QBEs captive reinsurance affiliate, Equator Reinsurance Limited (Equator Re).
The ratings reflect QBENA Groups historically favorable operating performance, solid risk-adjusted capitalization, highly diversified business portfolio developed through a multi-faceted distribution platform and its strategic importance to the global marketing strategy of QBE as a material contributor to QBEs overall results. The QBENA Groups operations also benefit from being integrated into the highly developed enterprise risk management system of QBE. The profitable results reflect the effectiveness of the groups niche and/or regional focus and the benefits of a highly diversified portfolio, from both the geographical and line of business perspectives. Furthermore, the strategic importance of QBENA Group continues to expand as the operating companies, particularly those most recently acquired, become more integrated within its infrastructure as QBE continues its worldwide expansion. QBE has demonstrated an historical track record of supporting its operations throughout the world, which is a positive rating attribute.
Partially offsetting these positive rating factors are QBENA Groups low operating returns; however, its returns are largely impacted by the conservative makeup of its investment portfolio, predominantly dedicated to high quality fixed income holdings that are generating low earnings due to the depressed, prevailing interest rate environment. Other offsetting rating factors include the execution risks associated with its growth by acquisition strategy, which include but are not limited to, integration and cultural issues, agency acceptance and the potential for unfavorable legacy issues to emerge. In 2011, QBE completed acquisitions of the U.S. property/casualty businesses of RenaissanceRe Holdings Ltd. and the Balboa Insurance Company. The acquired businesses continue to be folded into the QBENA Group portfolio in 2012. Notwithstanding these concerns, QBE does have a successful track record of profitably integrating acquisitions.
Potential upward movement in QBENA Groups ratings or a favorable change in its rating outlook is unlikely at this time. Any upward revision in the ratings would be largely dependent on the ratings of QBE, based on the groups current status within QBEs group of companies.
Factors that may lead to negative rating actions would include any changes to QBEs worldwide strategic plan that would alter its expansion in the United States, any material deterioration in the U.S. subsidiaries risk-adjusted capitalization and/or operating results, any negative rating actions taken on QBE and its affiliates and/or lessening of support (implied or explicit) provided to the U.S. insurance subsidiaries by QBE and Equator Re, which plays a key role as a material quota share reinsurance provider to QBENA Group. Equator Re is not rated by A.M. Best; however, it is reviewed and evaluated by A.M. Best separately and as part of the QBE ratings evaluation process. Any material shortfalls in Equator Res risk-adjusted capital also could have a consequential impact on the members of QBENA Group.
The FSR of A (Excellent) and ICRs of a+ have been affirmed for the following pooled and reinsured members of QBE North America Insurance Group:
- Blue Ridge Indemnity Company
- General Casualty Company of Wisconsin
- General Casualty Insurance Company
- Hoosier Insurance Company
- Lantana Insurance Ltd.
- National Farmers Union Property and Casualty Company
- North Pointe Insurance Company
- Regent Insurance Company
- Southern Fire & Casualty Company
- Southern Guaranty Insurance Company
- Southern Pilot Insurance Company
- Stonington Insurance Company
- Unigard Insurance Company
- Unigard Indemnity Company
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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