Fitch revises QBE outlook to positive

Fitch Ratings has revised the outlook on all the ratings of Australia-based QBE Insurance Group Limited and its subsidiaries to positive from stable. The agency has affirmed QBE’s Long-Term Issuer Default Rating at ‘A-’ and the Insurer Financial Strength (IFS) Ratings of the core subsidiaries’ at ‘A+’ (Strong). Fitch said that the Positive Outlook reflects QBE’s improving financial performance and solid capitalisation metrics, which compare favourably against its criteria guidelines for the ‘A’ IFS Rating category. The affirmation reflects the non-life insurance group’s ‘favourable’ company profile. “QBE’s underwriting performance has improved significantly in the past three years, supported by continued premium rate increases and various underwriting efforts across the group to reduce earnings volatility. Its Fitch-calculated combined ratio improved to 91% in the first half of 2024 and 93% in 2023 (2022: 95%), while return on equity rose to 16% and 14% over the same period (2022: 7%),” commented the ratings agency. “We expect the group’s reserve risk volatility to ease following recent reserve transactions, which reinsured up to $3.5bn of long-tail reserves in its North American and international businesses. QBE’s reported net profit doubled to $806m in the first half of 2024, from $404m in the first half of 2023, on a stronger insurance service result that reflected lower catastrophe costs and more stable reserve development. All segments recorded an underwriting surplus, including the North American business, which had previously reported weak results,” added Fitch. The ratings agency added that QBE’s Fitch Prism Global score was ‘Extremely Strong’ at end-2023, supported by low asset risks and a strong reinsurance programme, which limits the non-life insurer’s catastrophe exposure. Coverage of the regulatory prescribed capital amount (PCA) was high at 1.77x at end-1H24 and stronger than Fitch’s criteria guideline for the ‘A’ IFS Rating category. The ratio has also remained towards the top end of management’s target range of 1.6x-1.8x. QBE’s Fitch-calculated financial leverage ratio (end-1H24: 21%) is moderate and supportive of the ratings. Fitch said that it ranks QBE’s company profile as ‘favourable’ as a result of a ‘favourable’ business profile and ‘neutral’ corporate governance compared with that of other Australian insurers. It noted that QBE has a large operating scale and diversified international operations. “Stronger underwriting performance in its European and Australian businesses has offset weaker performance in North America in recent years. In June 2024, QBE said it will close its North American middle-market business while it refocuses on businesses that have more meaningful market positions, relevance and scale,” said the agency. Fitch also noted that QBE has demonstrated a “strong ability” to access both debt and equity capital markets. “Institutional and retail investors have supported QBE’s various capital initiatives and we believe sustained robust operational performance will underpin the insurer’s financial flexibility. QBE’s fixed-charge coverage ratio (2023: 9.6x, 2022: 4.7x) has risen in line with the improving profitability,” said Fitch.

Fitch revises QBE outlook to positive

Want to read this article?

Read Next

Marsh expects European cyber rates to continue softening next year

Munich Re and ERGO target higher profit in 2025

US commercial insurance market stable for buyers but sense of fragility remains

Mapfre Re launches first cat bond

Cyber consortium launches at Lloyd’s

Marsh expects European cyber rates to continue softening next year

Munich Re and ERGO target higher profit in 2025

US commercial insurance market stable for buyers but sense of fragility remains

Mapfre Re launches first cat bond

Cyber consortium launches at Lloyd’s

Keep yourself informed

Sign up for Commercial Risk’s newsletters

Want to read this article?

Read Next

Marsh expects European cyber rates to continue softening next year

Munich Re and ERGO target higher profit in 2025

US commercial insurance market stable for buyers but sense of fragility remains

Mapfre Re launches first cat bond

Cyber consortium launches at Lloyd’s

Related Articles

Keep yourself informed

Sign up for Commercial Risk’s newsletters