A.M. Best Revises ICR Outlook to Negative for QBE Insurance Group Limited and Its Main Subsidiaries

LONDON--(BUSINESS WIRE)--A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a+” of QBE Insurance (Europe) Limited (United Kingdom), QBE Re (Europe) Limited (United Kingdom) and QBE Insurance (International) Limited (Australia). These companies are key operating subsidiaries of QBE Insurance Group Limited (QBE) (Australia), the non-operating holding company of the QBE group of companies. A.M. Best also has affirmed the ICR of “bbb+” and all debt ratings of QBE. The outlook for all ICRs and debt ratings has been revised to negative from stable. The outlook for all FSRs remains stable. (See below for a detailed list of the debt ratings.)

“Risk Management and the Rating Process for Insurance Companies”

The revised outlook follows the publication on 12 November 2012 of QBE’s market update on its 2012 forecast results. A preliminary estimate of losses from Hurricane Sandy of between USD 350 million and USD 450 million, as well as an increase in projected prior year reserve strengthening for the full year, has led the group to revise its projected insurance profit margin for 2012 to 8% from 12%. As a result, the previously anticipated recovery in consolidated risk-adjusted capitalisation to a strong level, following deterioration in 2011, is not expected to materialise by year-end 2012.

A.M. Best will closely monitor the development in the group’s risk-adjusted capitalisation and performance over the next year. If consolidated risk-adjusted capitalisation recovers to the level previously expected by A.M. Best during 2013, the negative outlook could revert back to stable. The absence of an improvement in consolidated risk-adjusted capitalisation or a material decline in operating performance could lead to negative rating actions.

The following debt ratings have been affirmed, and the outlook has been revised to negative from stable:

QBE Insurance Group Limited—

- “bbb+” on USD 211 million 9.75% senior unsecured fixed rate notes, due 2014

- “bbb+” on GBP 191 million 10.00% senior unsecured fixed rate notes, due 2014

- “bbb+” on GBP 550 million 6.125% senior unsecured fixed rate notes, due 2015

- “bbb+” on USD 853 million 2.50% senior convertible securities, due 2030

- “bbb” on USD 250 million 5.647% subordinated notes, due 2023

- “bbb-” on USD 550 million 6.797% perpetual preferred securities (issued by QBE Capital Funding II L.P. (Jersey) and guaranteed by QBE)

- “bbb-” on GBP 300 million 6.857% perpetual preferred securities (issued by QBE Capital Funding L.P. (Jersey) and guaranteed by QBE)

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Understanding BCAR for Property/Casualty Insurers”; “Rating Members of Insurance Groups”; “Catastrophe Analysis in A.M. Best Ratings”; “Equity Credit for Hybrid Securities”; and “Insurance Holding Company and Debt Ratings”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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