Best Revises ICR Outlook to Negative for QBE North America Group; Affirms Ratings

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 Australia’s QBE Insurance Group Limited, the non-operating holding company of the QBE group of companies.

Best also revised the outlook for all of the ICRs to negative from stable, in line with its revision for QBE’s international operations. The outlook for all of the FSRs remains stable.

Best explained that the “revised outlook follows the publication on November 12, 2012 of QBE’s market update on its 2012 forecast results. A preliminary estimate of losses from Hurricane Sandy of between $350 million and $450 million, as well as an increase in projected prior year reserve strengthening for the full year to $380 million, has led the QBE group to revise its projected insurance profit margin for 2012 to 8 percent from 12 percent. As a result, the previously anticipated recovery in consolidated risk-adjusted capitalization to a strong level, following deterioration in 2011, is not expected to materialize by year-end 2012.”

Best indicated that it would “closely monitor the development in the group’s risk-adjusted capitalization and performance over the next year. If consolidated risk-adjusted capitalization recovers to the level previously expected by A.M. Best during 2013, the negative outlook could revert back to stable. The absence of an improvement in consolidated risk-adjusted capitalization or a material decline in the operating performance of the QBE group or its U.S. subsidiaries could lead to negative rating actions.”

Best summarized the companies affected by its rating actions as follows:
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.
• NAU Country Insurance Company
• National Farmers Union Property and Casualty 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

Source: A.M. Best