AM Best has lowered its Long-Term Issuer Credit Rating outlook on QBE’s key operating subsidiaries to negative, from stable, after its operating loss last year.

AM Best affirmed its ‘A’ Financial Strength Rating and ‘a+’ Long-Term Issuer Credit Rating for QBE Europe, QBE UK and the members of QBE North America Insurance Group and says the Financial Strength Rating outlook remained stable.

QBE’s actions to strengthen performance and its underlying performance improvements have “so far had limited positive impact on reported results,” the ratings agency says, and it may lower QBE’s Long-Term ICR “should these actions fail to return the group's operating performance metrics to a level more supportive of a strong assessment in the near-to-medium term”.

QBE reported a combined ratio of 107.4% for 2020, reflecting underwriting losses related to the COVID-19 pandemic, as well as adverse prior year reserve development and elevated catastrophe losses. Impairments to goodwill and other charges contributed to an operating loss of $US1.5 billion ($1.93 billion), against a 2019 profit of $US547 million ($702.92 billion).

“Comparatively weaker performance in recent years has weighed on QBE’s five- (2016-2020) and 10-year (2011-2020) weighted average combined ratios of 100.4% and 98.3%, respectively,” AM Best said.

The update says QBE’s balance sheet is resilient, reflecting actions undertaken in the first half of 2020 including raising capital, de-risking the investment portfolio and the purchase of additional reinsurance protection to offset the adverse underwriting and investment impacts arising from the COVID-19 pandemic.

QBE’s business profile was favourable, it says, reflecting excellent geographic diversification and strong competitive positions in its core markets, with an established focus on commercial lines insurance.