July 21, 2017 / 2:50 AM / a year ago

Fitch Revises Outlook on QBE to Positive; Affirms at IFS 'A+'

(The following statement was released by the rating agency) SINGAPORE, July 20 (Fitch) Fitch Ratings has revised the Outlooks on QBE Insurance Group Limited's (QBE) Long-Term Issuer Default Rating (IDR) and its subsidiaries' Insurer Financial Strength (IFS) ratings to Positive from Stable. The IDR on QBE is affirmed 'A-' while the IFS ratings on the subsidiaries are affirmed at 'A+'. A full list of rating actions is at the end of this commentary. The Positive Outlooks on QBE's ratings incorporate the improvement in operating performance as a result of the group's operational efficiency programme and other remediation efforts. Fitch expects these ongoing efforts to support QBE's operating performance and maintain sound financial fundamentals, including solid capital ratios and adequate financial leverage ratios. KEY RATING DRIVERS QBE's coverage of the regulatory prescribed capital amount (PCA) has improved to above 1.7x since 2015 from 1.67x in 2014. The PCA coverage rose to 1.76x by end-2016 from 1.73x at end-2015, driven by consistently sound financial performance and the group's efforts to streamline operations and enhance operational efficiencies. The coverage is stronger than Fitch's median criteria guideline of 1.60x for a 'AA' IFS rating. Its capitalisation, as measured by Fitch's Prism Factor-Based Capital Model (FBM), reached 'Strong' at end-2016. QBE's financial leverage, as measured by Fitch's adjusted debt/total capital ratio, was 23% at end-2016, stronger than the median criteria guidelines for an 'A' rated insurer. Excluding goodwill, the ratio was 30%, slightly weaker than Fitch's 'A' median criteria guideline. Fitch will continue to review QBE's financial leverage ratios, including and excluding goodwill, until margins and profitability strengthen further but place more emphasis on the ratio including goodwill. QBE's goodwill as a percentage of equity declined to 30% by end-2016, from a peak of 45% in 2011. QBE's reported combined ratio improved to 94.0% in 2016 from 94.9% in 2015 and averaged 96% in the five years to end-2016. This is stronger than Fitch's median criteria guideline of 103% for an 'A' rated insurer. We see stronger combined ratios as important, given the wide geographical spread and diversified businesses of the group. QBE's risky asset ratio, which measures equities, non-investment grade bonds and affiliate investments as a proportion of shareholders' equity, fell below 20% at end-2016, stronger than Fitch's median criteria guideline of 50% for an 'AA'rated insurer. We expect the group's investment portfolio to remain conservatively managed, with cash and fixed-income securities making up above 85% of QBE's portfolio at end-2016. The company's interest-coverage of 5x at end-2016 was weaker than Fitch's median criteria guideline of 7x for an 'A'rated insurer. Nonetheless, this has improved from a low of 3x in 2013. We expect further strengthening over time with the group's ongoing remediation efforts. Reserve risk is an important credit factor due to the nature of the group's profile and high reserve leverage. Our neutral assessment of the company's reserve adequacy results from the large risk margins held in claims reserves. We calculate QBE's claims reserve adequacy ratio (carried claims reserves/estimated reserving mid-points) at 103% at end-2016. RATING SENSITIVITIES Key rating triggers for an upgrade include a combined ratio of consistently below 95%, PCA coverage of above 1.7x for a prolonged period and its capital, as measured by Fitch's Prism Factor-Based Capital Model (FBM), reaching 'Very Strong' levels, alongside consistently favourable financial leverage ratio, sound market franchise and sustainable premium base. Key rating triggers for a downgrade include deterioration in its financial fundamentals, such as significant weakness in the business profile leading to loss of market share and franchise; combined ratio above 100%; PCA coverage of below 1.5x on a prolonged basis; financial leverage of above 30%; and fixed-charge coverage ratio of consistently below 4x. The full list of rating actions is as follows: QBE Insurance Group Limited (QBE): Long-Term IDR affirmed at 'A-'; Outlook revised to Positive from Stable USD600 million senior unsecured debt affirmed at 'BBB+' USD1 billion subordinated debt affirmed at 'BBB' GBP325 million subordinated debt affirmed at 'BBB' USD700 million subordinated debt affirmed at 'BBB' USD300 million subordinated debt affirmed at 'BBB' AUD200 million subordinated debt affirmed at 'BBB' GBP327 million subordinated debt affirmed at 'BBB' USD524 million subordinated debt affirmed at 'BBB' USD400 million subordinated debt affirmed at 'BBB' QBE Insurance Corporation: IFS rating affirmed at 'A+'; Outlook revised to Positive from Stable QBE Insurance (Europe) Limited: IFS rating affirmed at 'A+'; Outlook revised to Positive from Stable QBE Re (Europe) Limited: IFS rating affirmed at 'A+'; Outlook revised to Positive from Stable QBE Hongkong & Shanghai Insurance Limited: IFS rating affirmed at 'A+'; Outlook revised to Positive from Stable QBE Reinsurance Corporation: IFS rating affirmed at 'A+'; Outlook revised to Positive from Stable Equator Reinsurances Limited: IFS rating affirmed at 'A+'; Outlook revised to Positive from Stable Contact: Primary Analyst Wan Siew Wai Senior Director +65 6796 7217 Fitch Ratings Singapore Pte Ltd. One Raffles Quay, South Tower #22-11 Singapore 048583 Secondary Christopher Han Associate Director +65 6796 7224 Committee Chairman Jeff Liew Senior Director +852 2263 9939 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below