Ratings On QBE Insurance Group And Core Operating Entities Outlook Remains Positive

Stocks and Financial Services Press Releases Wednesday October 11, 2017 16:44
MELBOURNE--11 Oct--S&P Global Ratings

MELBOURNE (S&P Global Ratings) Oct. 11, 2017--S&P Global Ratings said today that it had affirmed its ratings on global multiline insurer QBE Insurance Group Ltd. (QBE Group), the group's core operating entities, and the group's other subsidiaries (see ratings list). The outlook remains positive on QBE group's core and highly strategically important operating entities.

QBE Group's full-year 2017 operating performance will be lower than our expectations, primarily as a result of atypical natural disasters and extreme weather events rather than any deterioration in underlying performance. We believe the group's underlying operating performance in the half year to June 30, 2017, was sound, although there was some volatility in the emerging markets division. The group's underlying combined ratio for the half year was relatively steady compared with the prior corresponding period and some other performance measures slightly improved, including continued positive prior year claims. The expected underwriting loss for the year is materially affected by the additional US$600 million allowance for large individual risk and catastrophe claims due to the unprecedented frequency and severity of natural disasters and extreme weather-related claims.

Key considerations for our assessment of the group's creditworthiness include the quality of the underwriting result for the full year, the progress of remediation of operations across global locations, in particular North America, and the extent of changes to capital management objectives. The rating remains underpinned principally by the very strong competitive position spanning developed and developing property casualty markets. The insurer supplements its solid underwriting and risk management capabilities with high quality capital, providing solid cover of risks. It also has diversified reinsurance cover.

The outlook is positive. An upgrade over the next 12 months would reflect our assessment of the benefits of portfolio remediation including the focus on sound risk selection and underwriting excellence. Collectively, the benefits from these initiatives will likely be indicated through improved underlying operating performance, and strengthened earnings resilience particularly from material operations such as North America, with a group net combined ratio below 95%.

An upgrade is also predicated on a continuation of top-line growth and reserve stability. We would consider whether the group's improved operating performance was repeatable and resilient in the context of market conditions, and how it compares with global peers. We expect QBE's exposure to subsequent to large weather events to be well managed and within its risk appetite.

We would likely revise the outlook to stable within the next 12 months if we viewed QBE's underlying operating performance had not improved or a likelihood that its North American operations were not able to improve to a level more in line with the group over the medium term. A material deterioration in capital adequacy or business position would also likely contribute to us revising the outlook to stable.

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