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A.M. Best has affirmed the “bbb+” long-term issuer credit rating (ICR) of QBE Insurance Group, with a stable outlook, citing a very strong balance sheet strength, strong operating performance, favourable business profile, and appropriate enterprise risk management as positive rating factors.
The ratings agency also affirmed the A (Excellent) financial strength rating (FSR) and “a+” long-term ICR of QBE's key operating subsidiaries QBE Insurance (UK), QBE Re (UK), and the pooled members of QBE North America Insurance Group, all with a stable outlook.
A.M. Best assessed QBE's balance sheet strength, which is underpinned by consolidated risk-adjusted capitalisation, to be at the very strong level, despite the group suffering huge catastrophe losses, deterioration in its emerging market division, and a one-off write-down of the deferred tax asset on capital.
A.M. Best said that the insurance giant's risk-adjusted capitalisation is expected to improve this year, “due primarily to a reduction in claims reserves as catastrophe losses are paid down, as well as the sale of the group’s Latin America business,” which is set conclude in the fourth quarter of 2018. A.M. Best's assessment also considered QBE’s commitment to its three-year scheme to buy back up to $1bn of shares.
QBE's adjusted financial leverage also continues to support the group's very strong balance sheet strength assessment despite its deterioration in 2017, with QBE actively managing down financial leverage through the early redemption and buyback of selected outstanding notes, the agency said.
Meanwhile, QBE's strong performance assessment took into account QBE’s strong and stable long-term performance track record, with the insurer reporting underwriting profits over the past 15 years with the exception of 2017.
“The group’s prospective underwriting performance, assuming normalised catastrophe experience, is expected to improve compared with 2017,” A.M. Best said. “The group is focusing on simplifying and remediating its portfolio, which includes exiting unprofitable segments such as its Latin American business.”
Lastly, A.M. Best said its assessment of QBE's business profile reflected the insurer's “favourable position as a global top 20 general insurance and reinsurance group with operations across the key insurance markets and a focus on commercial specialty lines of business.”
