Investing.com -- S&P Global Ratings has upgraded the credit rating of QBE Insurance Group Ltd. and its core subsidiaries. The group’s rating has been revised to ’A’ from ’A-’, while its core subsidiaries have been upgraded to ’AA-’ from ’A+’. The group’s improved capital adequacy and quality of earnings, which compare favorably with global multiline peers, are the main drivers behind the upgrade.
The revised ratings reflect S&P’s assessment that QBE’s capital will remain above the 99.99% stress level under their insurer risk-based capital model. This change in the group’s capital and earnings assessment has led to an upgrade of its financial risk profile to very strong from strong.
S&P also increased the ratings on QBE’s group issuances by one notch. The stable outlook for QBE is based on the expectation that the group will maintain its strong market position, consistently solid earnings, and excellent capital adequacy for at least the next two years.
The upgrade is also indicative of QBE’s strengthened earnings resilience, which is a result of improved underwriting and pricing discipline. The company’s ongoing efforts to improve risk selection and de-risk its insurance portfolio have also contributed to the enhancement of its earnings and capital adequacy.
QBE’s strong business position is supported by its extensive international presence in property/casualty (P/C) lines. The group’s significant P/C businesses across Europe, North America, and Australia contribute to its business diversity and solid earnings platform. QBE also benefits from the noncorrelated earnings generated by its lenders’ mortgage insurance businesses in Australia and Hong Kong.
The group reported a net profit of US$1.78 billion for 2024, up from US$1.36 billion in 2023. The improved result was due to renewal rate increases of 5.5% for the year, better catastrophe experience, and favorable prior-year reserve development. Investment returns were also supportive, with an investment return of 4.9%, slightly up on the prior year.
QBE’s combined ratio was 93.1% in 2024, compared with 95.2% in 2023. The ratio’s downward trend over recent years shows the group’s underwriting improvements and compares favorably with peers rated in the ’AA’ category.
Despite some underperformance in North America, the division delivered an improved result in 2024, with a combined ratio of 98.9%, down by 4.8 percentage points on the prior year. The group is taking actions to reduce volatility in this portfolio, including running off the noncore middle market business, reducing its exposure to peak catastrophes, and de-risking its exposure to noncore insurance line reserves. These initiatives are expected to strengthen its underwriting results in North America over the next two to three years.
S&P predicts a top-line growth of about 5% in 2025, with premium rate increases continuing to be supportive, despite some moderation. Gross written premiums increased 3% to US$22.4 billion in 2024, thanks to solid rate increases and good volume growth in the international division. This was offset by the portfolio exits from noncore programs in North America and Australia.
S&P expects QBE’s capital adequacy to be redundant at the extreme (i.e., 99.99%) stress level under their insurer risk-based capital model over their forecast period. This view aligns with QBE’s solid 1.86x regulatory capital multiple, which is above the group’s target range.
The stable outlook on QBE is based on S&P’s view that the company will maintain its strong competitive position for at least the next two years, supported by a diversified business mix and underwriting performance that compares favorably with similarly rated global multiline peers. The company is also expected to maintain robust capital adequacy capable of withstanding severe stress scenarios.
S&P could lower the ratings on QBE over the next two years if underwriting performance deteriorates or if capital adequacy materially weakens and is likely to remain at that lower level. An upgrade of QBE is considered unlikely over the next two years, although a higher rating would likely reflect reduced volatility across the group’s operating divisions, leading to consistently stronger group earnings.
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