Moody's downgrades QBE's debt rating

QBE’s profit warning has led Moody’s to downgrade the insurer’s senior debt rating from Baa1 to Baa2.

The Australian insurer revealed yesterday that it expects to make a $250m loss because of a $930m writedown and $670m reserve strengthening in its North American operations.

Moody’s said the downgrade reflected QBE’s weakened profitability, internal capital generation and debt service coverage.

Moody’s senior vice-president and lead analyst for QBE Alan Murray said: “The deterioration in QBE’s North American operations has been more rapid and pronounced than contemplated.

“However, the group’s worldwide combined operating ratio is still expected to come in the high-90% range for the full year, indicating an overall underwriting profit.”

Moody’s assigned QBE’s debt a stable outlook because it expects QBE will be less volatile in the future and likely to remain within the tolerances of the new rating level.

It expects QBE’s profitability to improve next year “despite continued headwinds for the North American operations” and that it will restore capital strength and de-leverage its balance sheet in time.