Best Upgrades QBE (UK) Ratings

June 10, 2005

A.M. Best Co. announced that it has upgraded the financial strength rating of QBE Insurance Company (UK) Limited (QBE UK) to “A” (Excellent) from “A-” (Excellent) and the issuer credit rating to “a” from “a-“. The outlook for both ratings is stable.

In a related bulletin, Best also announced that it has upgraded QBE International, another division of the Australian Group based in London (See related article).

“The rating upgrades factor implicit support and the additional financial flexibility afforded by QBE UK’s ultimate parent QBE Insurance Group Limited,” said Best. It also said the ratings reflect its “opinion that QBE UK’s risk-adjusted capitalisation is strong and likely to improve by year-end 2005. The improvement is expected to arise largely as a result of a 30 percent reduction in net premium income following the transfer in 2005 of QBE UK’s participation in the Ensign commercial motor portfolio to its parent company, QBE International Insurance Limited.”

Best noted, however, that “weakening market conditions are likely to put some pressure on prospective earnings,” although the rating agency indicated that it believes “a good level of earnings is achievable in 2005, albeit at a lower anticipated return on capital and surplus of between 10 percent-15 percent, down from 19.9 percent the previous year. The company has limited business diversification but maintains an excellent profile for UK employer’s liability which accounts for approximately 70 percent of overall gross premium.”

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