NOVEMBER 14, 2013 12:00 AM (EST)
A.M. Best Affirms Ratings of QBE Insurance Group Limiteds U.S. 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. - 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 QBEs 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 QBEs global business.
Given its scope and relative importance to QBE, QBENA Groups ratings also consider the explicit and implicit support provided by the parent, including QBEs captive reinsurance affiliate, Equator Reinsurances Limited (Equator Re). The outlook for QBENA Groups ICRs is negative, which is in lock step with the outlook assigned to QBEs ICR.
The ratings reflect QBENA Groups 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 Groups 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 Groups 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 QBEs 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 Groups 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 Groups 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 Groups 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 Groups ratings or a favorable change in its outlook would be largely dependent on the ratings of QBE, based on QBENA Groups current status within the parents group of companies. Other factors would include the stabilization of prior year reserve development, advancements in QBENA Groups 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 Res 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 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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