JANUARY 15, 2015 09:27 AM (EST)
A.M. Best Revises Outlook to Stable for QBE Insurance Group Limited and Its Key Subsidiaries
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FOR IMMEDIATE RELEASE
LONDON - JANUARY 15, 2015 09:27 AM (EST)
A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" for QBE Insurance (Europe) Limited (United Kingdom), QBE Re (Europe) Limited (United Kingdom), QBE Insurance (International) Limited (Australia) and the pooled and reinsured members of QBE North America Insurance 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. Additionally, A.M. Best has revised the outlook to stable from negative and affirmed QBE's ICR and senior debt rating of "bbb", as well as the debt ratings of the perpetual preferred securities of "bb+". (See below for a detailed list of the debt ratings.) At the same time, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of "a-" of QBE Optima Insurance Company, QBE's Puerto Rico subsidiary and a part of its Latin American operations. The outlook for these ratings remains stable.
The revision of the ratings outlook to stable from negative reflects A.M. Best's opinion that the group's consolidated risk-adjusted capitalisation has been restored to a strong level by a series of capital actions implemented during 2014. In addition, these actions, which included the raising of equity, the refinancing of debt and the sale of non-core assets, have reduced the group's financial leverage. A further improvement in these metrics is expected in 2015 supported by the disposal of other non-core assets.
QBE benefits from a track record of good technical performance, as demonstrated by a five-year average combined ratio of 94% (2009-2013). Overall profits have been produced in each of the past five years, apart from in 2013, when a pre-tax loss was reported due to the write off of goodwill and intangibles, primarily relating to the group's North American business unit. However, QBE has underperformed compared to its own published guidance, as well as A.M. Best's expectations, in each year since 2011, principally due to the impact of catastrophe losses, weaker than anticipated crop results and adverse reserve development. For 2014, a combined ratio of around 96% is expected, in line with QBE's published guidance as of August 2014.
Positive rating actions are unlikely in the near term. However, the stabilisation of QBE's performance, risk-adjusted capitalisation and financial leverage at a strong level could result in upward movement of the ratings longer term. Negative rating actions could follow material deterioration in operating performance, risk-adjusted capitalisation or financial flexibility.
The FSR and the ICRs have been affirmed and the outlook has been revised to stable from negative for the following pooled and reinsurance members of QBE North America Insurance Group:
The following debt ratings have been affirmed and the outlook has been revised to stable from negative:
QBE Insurance Group Limited—
— "bbb" on GBP 300 million 6.125% senior unsecured fixed rate notes, due 2015
— "bb+" on USD 550 million 6.797% perpetual preferred securities (issued by QBE Capital Funding II L.P. (Jersey) and guaranteed by QBE)
— "bb+" on GBP 300 million 6.857% perpetual preferred securities (issued by QBECapital Funding L.P. (Jersey) and guaranteed by QBE)
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.
Key insurance criteria reports utilised:
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.
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