Best Upgrades QBE Optima’s Ratings to ‘A-‘; Outlook Stable

August 16, 2012

A.M. Best Co. has upgraded the financial strength rating to ‘A-‘ (Excellent) from ‘B++’ (Good) and issuer credit rating to “a-” from “bbb” of QBE Optima Insurance Company, which is based in San Juan, Puerto Rico, and was formerly known as Optima Insurance Company. Best has also removed both of the ratings from under review with positive implications and has assigned them a stable outlook.

The ratings change follows the completion of the acquisition of the Optima Insurance Group in February 2012, by Australia’s QBE Insurance Group Limited through QBE Latin America Insurance Holdings, S.L. The Optima Group was the former ultimate parent of Optima Insurance Company. The company was subsequently re-named QBE Optima Insurance Company.

The rating actions follow the “completion of the planned intercompany reinsurance agreement between QBE Optima and QBE’s Bermuda reinsurance subsidiary, Equator Reinsurances Limited (Equator Re) (Bermuda),” Best explained.

“Equator Re will provide considerable quota share reinsurance support for QBE Optima’s guaranteed automobile protection, automobile physical damage and personal lines property lines of business. Further consideration is being given to the additional support that Equator Re may give in 2013 to QBE Optima’s other commercial lines outside of automobile physical damage exposures.”

Best added that “QBE Optima’s ratings reflect its strong risk-adjusted capitalization, profitable operating earnings that have been augmented by solid investment income and its enhanced reinsurance program now in place, especially regarding expanded limits of coverage at the top layers of the program. The ratings also reflect the benefits provided by the company’s affiliated insurance agency, Colonial Insurance Agency, which gives QBE Optima access to profitable business with demonstrated loss experience that should support profitable growth, and the benefit of both implicit and explicit support of QBE.

“This support includes the enhanced business profile of QBE Optima via its recent name change, particularly considering QBE’s status as one of the largest global insurance and reinsurance organizations in the industry. Additionally, expert investment guidance, information technology support, potential savings through common services and significantly improved financial flexibility to support the company’s growing operations should all yield tangible benefits to QBE Optima.”

Best said the stable outlook “recognizes QBE Optima’s strong capital position and projections for solid operating earnings,” which, Best said, it “expects will help to further fortify its capitalization and support efforts to continue growing the operation.

“A further upgrading of QBE Optima’s ratings or a revision of the outlook over the long term could possibly result from improved underwriting and operating results that fuel the company’s heightened balance sheet strength, along with a boost in its business profile from being a part of the QBE organization.

“Possible downward movement in the ratings or a revision of the outlook could result from material deterioration in the profitability of maturing accident years, which could possibly lead to a notable decline in the company’s balance sheet strength.”

Source: A.M. Best

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