By Navneeta Nandan
May 23 - (The Insurer) - S&P Global Ratings has upgraded QBE Insurance Group’s issuer credit rating to A from A-minus and updated the rating on its core operating entities to AA-minus from A-plus.
It also raised the long-term issue credit ratings on the Australian insurer’s capital instruments by one notch.
S&P said that this upgrade is because QBE’s quality and consistency of earnings has strengthened, and it compares well with global multiline peers. This translates into improved underwriting and pricing discipline and reflects improved capital adequacy.
The earnings and capital adequacy are a result of QBE’s ongoing effort to improve risk selection and de-risking its insurance portfolio, S&P said. This has led to the revision of the insurer’s financial risk profile from strong to very strong. The ratings agency said that their outlook is that capital will remain above the 99.99% stress level due to QBE’s risk-based capital model.
The ratings agency predicted that QBE will maintain its strong competitive position for at least the next two years and sustain robust capital adequacy capable of withstanding severe stress scenarios.
S&P said another upgrade of QBE over the next two years is unlikely.
“We 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. This could result from a shift in risk appetite, inadequate pricing or risk selection, or ineffective reinsurance protection,” it added.
QBE Insurance Group has reported a trend of improvement in its combined ratio from 95.2% in 2023 to 93.1% in 2024. S&P said that it compares well with other carriers in the ‘AA’ category. Due to underperformance in North America, QBE's division in the region posted a combined ratio of 98.9% in 2024, which was still 4.8 percentage points down from the previous year.
QBE posted a net profit of $1.78 billion in 2024, up from $1.36 billion in 2023, reflecting improved renewal rate of 5.5%, favorable reserve development from previous year, and a 4.9% rise in the investment return in 2024.
The forecast for an increase in the total revenue for 2025 is about 5% with an increase in premium rate. S&P said that it expects the insurer’s capital adequacy to be redundant at the extreme (99.99%) stress level under its insurer risk-based capital model over the forecast period.