Best Affirms QBE’s ‘A’ Ratings

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of UK-based QBE Insurance (Europe) Limited , QBE Insurance (International) Limited of Australia and QBE Reinsurance (Europe) Limited (QBE Re), which is based in Ireland.

The companies are regarded as key operating subsidiaries of Australia’s QBE Insurance Group Limited, the non-operating holding company of the QBE group of companies. Best also affirmed the ICR of “bbb+” and all debt ratings of QBE with stable outlooks.

“QBE is expected to maintain excellent consolidated risk-adjusted capitalization in 2008,” said Best. “Internal capital generation is expected to comfortably support modest premium growth and the acquisition of mortgage insurers, PMI Mortgage Insurance Limited (Australia) and PMI Mortgage Insurance Asia Limited (Hong Kong).”

Best also said it “believes QBE derives significant financial flexibility from its access to the equity and debt markets and has a track record of raising capital to support its strategic plans.”

Consolidated pre-tax profit is anticipated to be strong in 2008, “underpinned by a combined ratio of between 85 percent and 90 percent (2007: 85.3 percent),” Best continued. It said that “although rates are deteriorating in each of the group’s core regions,” Best expects “QBE’s robust risk management infrastructure, prudent reserving practices and conservative reinsurance program to support solid performance through the cycle downturn. In addition, the group’s low-risk investment strategy is likely to support prospective earnings stability, although 2008’s investment return is expected to be negatively affected by equity market volatility in the first half of the year.”

Best concluded that in its opinion, “QBE has a good business profile, which benefits from excellent geographic and product diversification. The group continues to strengthen its competitive position in its core regions (Australia/Asia Pacific, Europe and the Americas), principally through acquisition-based growth. In 2007, QBE significantly enhanced its share of the U.S. market with the acquisition of Praetorian Financial Group, Inc. and Winterthur US Holdings Inc (now QBE Regional Companies [N.A.], Inc.).”

Source: A.M. Best – www.ambest.com