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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 14, 2013 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a+” of the pooled and reinsured members of QBE North America Insurance Group (QBENA Group). These companies are key operating subsidiaries of QBE Insurance Group Limited (QBE) (Australia), the non-operating holding company of the QBE group of companies. The outlook for the FSR is stable, while the outlook for the ICRs is negative. (See below for a detailed listing of the companies and ratings.)
All QBENA Group members are important to the expansion of QBE’s 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 36% of QBE’s global business.
Given its scope and relative importance to QBE, QBENA Group’s ratings also consider the explicit and implicit support provided by the parent, including QBE’s captive reinsurance affiliate, Equator Reinsurances Limited (Equator Re). The outlook for QBENA Group’s ICRs is negative, which is in lock step with the outlook assigned to QBE’s ICR.
The ratings reflect QBENA Group’s strong 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 its overall results. The QBENA Group’s operations also benefit from being integrated into the highly developed enterprise risk management system of QBE. The ratings also consider the benefits garnered from QBENA Group’s niche and/or regional focus and highly diversified portfolio, from both a product and geographic perspective. Furthermore, the strategic importance of QBENA Group continues to expand as the operating companies become more integrated within QBE’s infrastructure. 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 Group’s recent sub-par underwriting and operating performance during the last two full years and its low operating returns. While calendar year results through 2013 indicate some anticipated improvement, QBENA Group’s returns continue to be challenged with slow economic growth in the United States, along with a prevailingly low interest rate environment. Other noteworthy offsetting factors include heightened regulatory scrutiny and lessened profit margins on certain lender-placed business, earnings volatility associated with its leading crop insurer, NAU Country Insurance Company, and the ongoing challenges around business written within QBENA Group’s program unit, which in recent years has manifested adverse prior year loss reserve development. The potential for further adverse reserve development also is a consideration.
Potential upward movement in QBENA Group’s ratings or a favorable change in its outlook would be largely dependent on the ratings of QBE, based on QBENA Group’s current status within the parent’s group of companies. Other factors would include the stabilization of prior year reserve development, advancements in QBENA Group’s core, ongoing businesses and fortification in its already strong risk-adjusted capitalization.
Factors that may lead to negative rating actions would include 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 Re’s risk-adjusted capital also could have a consequential impact on 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
· NAU Country Insurance Company
· North Pointe Insurance Company
· Praetorian Insurance Company
· QBE Insurance Corporation
· QBE Reinsurance Corporation
· QBE Specialty 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 Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.