2013-12-12 17:38:03 -
A.M. Best Europe – Rating Services Limited has downgraded the issuer credit ratings (ICR) to “a” from “a+” and affirmed the financial strength ratings (FSR) of A (Excellent) of QBE Insurance (Europe) Limited (United Kingdom), QBE Re (Europe) Limited (United Kingdom) and QBE Insurance (International) Limited (Australia).
These companies are key operating subsidiaries of QBE Insurance Group Limited (QBE) (Australia), the non-operating holding company of the QBE group of companies. A.M. Best also has downgraded QBE’s ICR and senior debt ratings to “bbb” from “bbb+”, as well as the debt ratings of the perpetual preferred securities to “bb+” from “bbb-”. The outlook for the FSR has been revised to negative from stable, while the outlook for all ICRs and debt
ratings remains negative. (See below for a detailed list of the debt ratings.)
The downgrades follow the announcement on 9 December 2013 that QBE has revised its full year forecast for 2013 to a level that falls short of A.M. Best’s expectations. The group’s consolidated risk-adjusted capitalisation and financial leverage position are expected to improve by year-end 2013, but not to a level supportive of the “a+” ratings held by QBE’s operating entities prior to this rating action. Moreover, the revised forecast brings QBE’s recent performance to a level that falls short of A.M. Best’s expectations with regard to technical profitability. This is due to a number of revisions including greater than expected reserve strengthening on liabilities associated with US programme business. Furthermore, the group’s profit-after-tax has been negatively affected by material write-downs of goodwill and other intangible assets.
The negative outlook on the ratings reflects the uncertainty surrounding QBE’s future performance and financial flexibility.
Positive rating actions are unlikely at this time. Worse than expected performance, further material reserve strengthening or impairment of the group’s financial flexibility could lead to negative rating actions.
The following debt ratings have been downgraded.
QBE Insurance Group Limited—
- to “bbb” from “bbb+” on USD 211 million 9.75% senior unsecured fixed rate notes, due 2014
- to “bbb” from “bbb+” on GBP 191 million 10.00% senior unsecured fixed rate notes, due 2014
- to “bbb” from “bbb+” on GBP 550 million 6.125% senior unsecured fixed rate notes, due 2015
- to “bbb” from “bbb+” on USD 853 million 2.50% senior convertible securities, due 2030
- to “bb+” from “bbb-” on USD 550 million 6.797% perpetual preferred securities (issued by QBE Capital Funding II L.P. (Jersey) and guaranteed by QBE)
- to “bb+” from “bbb-” on GBP 300 million 6.857% perpetual preferred securities (issued by QBE Capital Funding L.P. (Jersey) and guaranteed by QBE)
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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Best Europe - Rating Services Limited Supplementary Disclosure : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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