Moody's Investors Service has affirmed its A3 issuer rating for QBE.
The rating follows QBE’s announcement that it would undertake a long-term distribution agreement with Bank of America in the US and acquire the Balboa insurance portfolio.
Under the terms of the acquisition, QBE has agreed to renew the rights of the Balboa lenders placed insurance business for an up-front payment of US$700 million.
"The affirmation of QBE's ratings with a stable outlook is based on the fact that the acquisition will not materially impact its financial fundamentals and in view of its strong profitability. Furthermore, the acquisition is expected to meet QBE's target return on capital," Moody's vice president Wing Chew said.
"The acquisitions are further expected to add gross written premiums of US$1.5 billion and a return on net earned premiums of 15 to 20 per cent in the first full year.”
Further, Moody's believes that the funding arrangement for the acquisition – which is based on a combination of cash, a fully underwritten dividend reinvestment plan, and short-term bank lines – will only increase financial leverage marginally.
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