Major ratings agencies have downgraded QBE after the group last week warned it is heading for a $US250 million ($274.35 million) loss this year.

QBE issued a statement to the Australian Securities Exchange on Friday in response to announcements by the four agencies, with CEO John Neal saying downgrades to the issuer credit ratings (ICRs) do not have a material impact on the company’s performance or its business.

“As an insurer, each of our rating agencies are important to QBE but the insurer financial strength ratings (FSRs) from Standard & Poor’s and AM Best are the ratings most important to our customers and brokers, and we are pleased that these have not changed,” he said.

Three agencies have downgraded the outlook on QBE to negative, and Mr Neal says the company will be working to return these to stable.

Moody’s Investor Services has dropped QBE’s ICR to Baa2 from Baa1 but kept the outlook at stable.

Fitch has downgraded the insurer’s long-term issuer default rating – its ICR – to A- from A and revised the outlook to negative from stable.

AM Best cut QBE Group’s ICR to bbb from bbb+ and downgraded the ICRs of key subsidiaries to A from A+. It has affirmed the A rating on the subsidiaries’ FSRs but revised the outlook to negative from stable.

Standard & Poor’s (S&P) is the only agency to maintain ratings. It affirmed QBE Group’s ICR at A- and the financial strength ratings of core subsidiaries at A+, but cut its outlook on them to negative from stable.

S&P says the negative outlook reflects concern about QBE’s North American operations and its lack of confidence that there will be no more reserve strengthening.

“Of particular concern is the most recent reserve strengthening of QBE’s North American program business – the third time this has occurred in just over a year.”

S&P says it will consider downgrading QBE if the North American operations continue to make a loss over the next year.

Moody’s says its downgrade reflects QBE’s weakened profitability and concerns about internal capital generation and debt service coverage measures.

“The stable outlook reflects Moody’s expectations that QBE should be less susceptible to operational volatility going forward,” the agency said. It believes profitability will strengthen next year.

Moody’s affirmed the A2 FSR of QBE Lenders’ Mortgage Insurance (LMI), due to the insurer’s low and stable loss ratios, a significant surplus to regulatory capital requirements and leading market positions.

Fitch also says QBE LMI’s rating is unaffected. The agency downgraded the group’s ICR due to uncertainty about its “significant level of goodwill”, at $US4 billion ($4.39 billion). But it affirmed the FSRs because of the group’s historically strong underwriting performance.

“The revision of the rating outlook to negative reflects the potential for further goodwill impairments, ongoing operational problems and constrained financial flexibility,” Fitch said.

AM Best says its negative outlook reflects uncertainty surrounding QBE’s future performance and financial flexibility. “Worse-than-expected performance, further material reserve strengthening or impairment of the group’s financial flexibility could lead to negative rating actions,” it said.

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