Best Sees No Change in QBE’s Rating from Balboa Buy

February 17, 2011

A.M. Best Europe – Rating Services Limited has commented that the rating of Australia’s QBE Insurance Group Limited is “unchanged following the announcement that it has entered into a ten-year distribution agreement with Bank of America Corporation for lender-placed and voluntary homeowners’ contents, motor and other related consumer lines and associated services.”

Part of the agreement calls for QBE to assume the “outstanding claims and unearned premium liabilities of Balboa Insurance Company and affiliated entities in return for matching assets.

The upfront payment to Bank of America Corporation of $700 million will be funded through reinvestment of the 2010 final dividend, as well as a subordinated debt issue, which will replace short-term bank facilities put in place to initially fund the payment. The transaction is subject to regulatory approval and is expected to be completed in April 2011.

Best said “consolidated risk-adjusted capitalization is likely to remain excellent following the acquisition, despite an increase in goodwill on QBE’s balance sheet. Financial leverage ratios are expected to remain within A.M. Best’s tolerance levels.

“In addition, Balboa’s specialist personal lines portfolio and established distribution infrastructure are expected to improve the group’s competitive position in the U.S. lender-placed homeowners’ insurance market.

Source: A.M. Best

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