DECEMBER 12, 2013 12:00 AM (EST)

A.M. Best Downgrades Issuer Credit Ratings of QBE Insurance Group Limited’s U.S. Subsidiaries


CONTACTS:
 
David Blades, CPCU
Senior Financial Analyst
(908) 439-2200, ext. 5422
david.blades@ambest.com

Joseph Roethel
Assistant Vice President
(908) 439-2200, ext. 5630
joseph.roethel@ambest.com

Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
rachelle.morrow@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK, N.J. - DECEMBER 12, 2013 12:00 AM (EST)
A.M. Best Co. has downgraded the issuer credit ratings (ICR) to “a” from “a+” and affirmed the financial strength rating (FSR) of A (Excellent) 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 has been revised to negative from stable, while the outlook for the ICRs is negative. (See below for a detailed listing of the companies and ratings.)

The downgrades follow the announcement on December 9, 2013 that QBE had revised its full year forecast for 2013 to a level that falls short of A.M. Best’s expectations. The reasons for the forecast revision are centered on performance and other issues pertaining to the QBENA Group. The performance issues included a $300.0 million increase in reserves on outstanding liabilities related to U.S. program business, higher than expected claims activity that increased the expected combined ratio for U.S. crop business by 10 points to nearly breakeven, and a rapid, material contraction of QBENA Group’s lender-placed business, leading to the expectation that this division will post a loss in 2013 with some additional contraction in 2014. QBENA Group is now expected to generate a net loss in 2013.

The outlook for QBENA Group’s ICRs is negative and is in lock step with the outlook assigned to QBE’s ICR, which is, in part, reflective of the uncertainty surrounding the performance of QBENA Group and its impact on QBE.

Positive rating actions for QBENA Group are unlikely at this time. Factors that may lead to negative rating actions include any further material deterioration in its operating results and risk-adjusted capitalization, and 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.

The FSR of A (Excellent) has been affirmed and the ICRs have been downgraded to “a” from “a+” 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.

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