Best Affirms QBE US Subsidiaries Ratings; Upgrades Praetorian and NAU

October 4, 2010

A.M. Best Co. has upgraded the financial strength ratings (FSR) to ‘A’ (Excellent) from ‘A-‘ (Excellent) and issuer credit ratings (ICR) to “a” from “a-” of Pennsylvania-based Praetorian Insurance Company and Minnesota-based NAU Country Insurance Company. Both are operating companies of QBE Americas Group.

Best also affirmed the FSRs and ICRs of other operating entities of QBE Americas, which include QBE Re Group – US (QBE Re) (New York, NY) and its members, North Pointe Insurance Company (NPIC) (Southfield, MI) and North Pointe Casualty Insurance Company (NPCIC) (Jacksonville, FL).

In addition Best announced that it has upgraded the ICRs to “a+” from “a” and affirmed the FSRs of ‘A’ (Excellent) of Delaware-based QBE Regional Insurance Group and its members. The outlook for all of the ratings is stable, except for the ratings of NAU, which have been removed from under review with positive implications and assigned a stable outlook.

All of the aforementioned companies are members of QBE Americas and are a key part of the ultimate parent, Australia’s QBE Insurance Group Limited’s expansion plans in the United States. QBE Americas also is a major contributor to the worldwide operations of QBE, one of the largest global insurance organizations.

“Each rating action considers the company’s strategic role and importance to the overall specialty operations of QBE Americas, the explicit and implicit support provided by QBE and its affiliates, as well as the independent attributes of each company including risk-adjusted capitalization, operating performance and business profile,” Best explained.

“The upgrading of the ICR for QBE Regional recognizes its strong historical operating profitability and its importance to QBE Americas, as QBE Regional is QBE’s largest premium and earnings producer.

“The upgrading of the ratings of Praetorian and NAU also reflect the explicit quota share reinsurance support received from their reinsurance affiliate, Equator Reinsurances Limited, as well as anticipated business and profitability prospects from being part of QBE. This is particularly true of Praetorian, which according to management, has taken strides in re-underwriting its portfolio of program business, eliminating ones that did not meet the profitability and return standards of QBE.”

Best also noted that the ratings contemplate the “niche and/or regional focus and the diversified book of business of QBE Americas among its respective operating groups.

“Furthermore, the strategic importance of QBE Americas continues to expand as the operating groups, particularly those more recent acquisitions, become more integrated within the overall organization of QBE. QBE has demonstrated an historical track record of supporting its operations throughout the world, which is a positive rating attribute.”

As partial offsetting factors, Best cited “the significant acquisition activity that is central to the QBE Americas strategy. The QBE Americas segment has more than doubled its size within the United States since 2007.”

As a result Best indicated that there are “various inherent risks associated with a growth by acquisition strategy, which include but are not limited to, integration and cultural issues, agency acceptance and the potential for unfavorable legacy issues to emerge. These concerns notwithstanding, QBE Americas does have a successful track record integrating acquisitions profitably thus far.”

For a complete list of Best’s ratings for the QBE Insurance Group Limited and its subsidiaries’
FSRs and ICRs, go to:

Source: A.M. Best

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