Fitch Ratings Inc. on Wednesday affirmed the A+ financial-strength rating of Australia-based QBE Insurance Group Ltd. but revised its outlook to negative, one day after Moody's Investors Services Inc. downgraded QBE's issuer and senior unsecured debt ratings.
The revision of the outlook to negative from stable “reflects the potential for further goodwill impairments, ongoing operational problems and constrained financial flexibility,” Fitch said in a statement.
QBE said previously that its problems stem primarily from its North American operations.
The rating changes followed QBE's unexpected $930 million write-down of goodwill and intangibles, and $150 million of primarily information technology and lease costs in addition to a $650 million prior-year accident claims reserve deterioration, Fitch said.
While QBE's financial-strength rating is supported by its good access to equity and debt capital markets when required based on the insurer's record of strong earnings and solid underwriting performances, Fitch said that could change.
“In Fitch's opinion, further underperformance could erode QBE's historically strong financial flexibility, which would not be consistent with an 'A+' rating,” the rating agency said in a statement.
Fitch's action Wednesday followed Tuesday's announcement by Moody's that it had downgraded QBE's issuer and senior unsecured debt ratings.
Moody's said the downgrade “reflects the group's weakened profitability, internal capital generation and debt service coverage measures” as well as “the likelihood of lower prospective profitability from the group's North American operations.”
“The deterioration in QBE's North American operations — with respect to both the lender-placed business and the reserve adequacy position — has been more rapid and pronounced than contemplated,” Alan Murray, senior vice president and lead QBE analyst at Moody's, said in a statement.