S&P Places Mercantile Mutual on CreditWatch-Negative

May 14, 2004

Standard & Poor’s Ratings Services announced that it has placed its “AA-” counterparty credit and insurer financial strength ratings on Mercantile Mutual Insurance (Australia) Ltd. “on CreditWatch with negative implications (previously negative outlook).”

The action follows the announcement that Australia’s QBE Insurance Group Ltd. has agreed to purchase ING’s 50 percent share in the QBE Mercantile Mutual joint venture, as well as ING’s other Australian general insurance business (See IJ Web site May 13).

“At the completion of the acquisition, expected to be on June 30, 2004, which is now subject to regulatory consents and definitive contracts, the ratings on Mercantile Mutual are likely to be downgraded to “A+” and given a stable outlook,” stated Michael Vine, S&P credit analyst – Financial Services Ratings.

The bulletin noted that such action would be an “alignment with the “A+” ratings on the principal operating subsidiaries of the QBE group, including QBE Insurance (Australia) Ltd. The acquisition of the remaining 50 percent of the joint venture consolidates QBE as a significant player in Australian commercial lines insurance business.”

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