S&P Comments on, QBE-AXA-Winterthur US Deal

January 5, 2007

Standard & Poor’s Ratings Services indicated that its ratings on France’s AXA Group, including Winterthur Swiss, and Australia’s QBE won’t be affected by the sale of Winterthur’s US-based business to QBE (See related article).

Concerning AXA and its core subsidiaries, which S&P rates “AA-” with a stable outlook, the rating agency said the proposed sale of Winterthur’s U.S.-based P/C business to QBE “would have no impact on Winterthur’s strategically important status within the AXA group. Furthermore, the transaction will not materially affect AXA group’s business and financial profile.”

Similarly S&P said “its ‘A+’ ratings on the core operating entities of QBE Insurance Group Ltd. (QBE; A-/Stable/–) are unchanged after QBE’s announcement of the acquisition of U.S.-based property and casualty insurer, Winterthur U.S. Holdings Inc.”

S&P has not rated either Winterthur US or its two main underwriting divisions, General Casualty Co. and Uniguard Inc.

After reviewing the financial details of the transaction, S&P concluded: “Although the planned acquisition represents only approximately 15 percent of QBE’s expected gross annual premiums at Dec. 31, 2006, it would enhance QBE’s business profile in the U.S., providing it not only a larger scale of operations, but also a strong geographical presence and a sound distribution platform.

“Winterthur U.S. has a sound business position in the U.S with good brands, and a well-established infrastructure and distribution platform in commercial and personal business lines. Additionally, Winterthur U.S.’ underwriting performance is reasonable with an estimated combined ratio of 95.8 percent in fiscal 2006.”

S&P credit analyst Derryl D’silva noted: “The planned acquisition is also supportive of QBE’s U.S.-based strategy, which is to build four key business streams: specialist insurance programs; reinsurance; and property and casualty insurance in regional markets and Latin America. Combined with its December 2006 acquisition of Praetorian Financial Group, QBE’s U.S.-based operations could increase their contribution to almost 40 percent of gross premium income of the QBE group in fiscal 2007.”

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