More than $5 billion has been wiped off QBE's market value in just two days, as investors punish the company for repeatedly disappointing - and analysts warn further pain could follow this week's shock profit downgrade.
In another blow to the insurer, its credit rating was last night downgraded by a notch by Moody's, citing a weaker outlook for profits and higher debts.
The agency cut its ratings on QBE's debt to Baa2, two notches above the rating it gives to "junk" or speculative assets.
Pessimism continued to drive QBE shares sharply lower on Tuesday, taking the decline in its shares since it forecast a $US250 million ($275 million) loss this year, on Monday, to 30 per cent.
QBE shares fell 9.8 per cent to $10.82, and its market capitalisation fell more than $1 billion, weighing on the benchmark ASX 200 for the second day in a row. The fall came as analysts at CIMB, Bell Potter and Macquarie downgraded their recommendations on the stock.
Even investors without QBE shares could be affected, as fund managers said the dramatic slump was undermining sentiment, and after Qantas's woes raised the prospect of more earnings downgrades in months to come.
On Monday QBE revealed $US600 million in write-downs in its US businesses and said profits would remain under pressure for 2014, sparking the sharpest fall in its share price in 12 years. Broking analysts predicted it may still have more skeletons in the closet, with several saying its US problems were unlikely to be resolved any time soon.
Bell Potter analyst T.S. Lim said responding to the US challenges threatened to tie up management for much of next year, instead of them focusing on more promising parts of the company such as its Australian business.
"My greatest fear is that they are going to be distracted by US legacy issues," Mr Lim said.
While the response to QBE's woes is partly because it will pay lower dividends, investors' trust in management has also been shaken. It was the third profit downgrade from chief executive John Neal in 12 months.
In a note to clients, Citi analyst Nigel Pittaway said its position in the US still looked "suspect".
Mr Pittaway said he would not rule out the closure of part of its US business, and QBE appeared to lack a long-term advantage over competitors in its Financial Services Partners portfolio, which includes its embattled mortgage insurance arm.
Another concern raised by QBE's downgrade is its credit rating, which could be threatened by a forecast increase in its leverage to 43 per cent, from 40 per cent.
Since the bad news was revealed on Monday, credit default swaps on QBE's debt - which measure default risk - have also blown out 40 basis points.
Moody's last night cut its rating on QBE's debt for the second time this year, and some analysts think Standard & Poor's may make a similar move.
Fund managers say the severity of the plunge is also eroding investor sentiment more broadly.
John Abernethy of Clime Asset Management said QBE's woes, coupled with downgrades from Qantas last week and WorleyParsons in November, suggested earnings forecasts would be cut in the new year. "We've had a substantial rally in the market without earnings growth," he said.
While QBE's overseas expansion has made it a global insurer, the share price fall puts its $13.2 billion market value close to that of domestic-focused Insurance Australia Group, at $12 billion, and makes it smaller than Suncorp.