Best Affirms QBE’s US Subsidiaries Ratings; Upgrades North Pointe

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A’ (Excellent) from ‘A-‘ (Excellent) and issuer credit rating (ICR) to “a+” from “a-” of Harrisburg, Penna.-based North Pointe Insurance Company (NPIC).

Best has also affirmed the FSR of ‘A’ (Excellent) and ICRs of “a+” of QBE Regional Insurance Group (QBE Regional) and its members, as well as the FSR of ‘A’ (Excellent) and ICRs of “a” of QBE Re Group – US (QBE Re), NAU Country Insurance Company (NAU) of Ramsey, Minn., and Praetorian Insurance Company.

All of these companies are operating entities of QBE Americas Group (QBE Americas). The outlook for all of the ratings is stable.

All of the aforementioned companies are key parts of the ultimate parent, Australia’s QBE Insurance Group Limited, and are important for its expansion plans in the United States. QBE Americas also is a major contributor to the worldwide operations of QBE, one of the largest global insurance organizations.

Best explained: “Each rating action considers each company’s strategic role and importance to the overall specialty operations of QBE Americas, the explicit and implicit support provided by QBE and its affiliates, including reinsurance affiliate, Equator Reinsurances Limited, as well as the independent attributes of each company including risk-adjusted capitalization, operating performance and business profile.

“The upgrading of the ICR for NPIC reflects the full rating enhancement afforded to the company given the explicit support provided by an affiliate, General Casualty Company of Wisconsin, in the form of substantial quota share reinsurance, effective October 1, 2011.”

Best also indicated that the ratings “contemplate the niche and/or regional focus and the diversified book of business of QBE Americas among its respective operating groups. Furthermore, the strategic importance of QBE Americas continues to expand as the operating groups, particularly those most recently acquired, become more integrated within the overall organization of QBE. QBE has demonstrated an historical track record of supporting its operations throughout the world, which is a positive rating attribute.”

In addition Best noted that “earlier in 2011, QBE completed acquisitions of the U.S. property/casualty businesses of RenaissanceRe Holdings Ltd. and the Balboa Insurance Group. The acquired businesses will initially be reinsured by either QBE Regional, QBE Re’s member insurance companies or by NAU before being directly written by QBE Americas, beginning in 2012.”

As a partial offsetting factor, Best cited “the significant acquisition activity that is central to the QBE Americas strategy. Since 2007, the QBE Americas segment has more than doubled its size within the United States. There are various inherent risks associated with a growth by acquisition strategy, which includes but is not limited to, integration and cultural issues, agency acceptance and the potential for unfavorable legacy issues to emerge. The 2011 acquisitions expanded these risks. Notwithstanding, these concerns, QBE Americas does have a successful track record of profitably integrating acquisitions.”

Best summarized the company’s included in its rating actions as follows:
The FSR of ‘A’ (Excellent) and ICRs of “a” have been affirmed for QBE Re Group – US and its following members:
* QBE Reinsurance Corporation
* QBE Insurance Corporation
* QBE Specialty Insurance Company

The FSR of ‘A’ (Excellent) and ICRs of “a+” have been affirmed for QBE Regional Insurance Group and its following members:
* 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
* 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