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).
Best explained that “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.”
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 Best’s expectations.
“The reasons for the forecast revision are centered on performance and other issues pertaining to the QBENA Group,” Best explained. “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.”
Best said 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.”
Best summarized the companies affected by the rating actions as follows:
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
Source: A.M. Best