Best: QBE Ratings Under Review/Negative; Winterthur US/Positive

January 8, 2007

A.M. Best Co. has placed the issuer credit rating (ICR) of “bbb+” of Australia’s QBE Insurance Group Limited under review with negative implications. Best also placed all of QBE’s subsidiaries financial strength ratings (FSR), ICRs and debt ratings under review with negative implications.

At the same time Best placed the financial strength rating (FSR) of “A-” (Excellent) and the ICR of “a-” of the Winterthur U.S. Group and its members under review with positive implications.

The rating actions follow the announcement that QBE Reinsurance Corporation has signed an agreement to acquire Winterthur US from France’s AXA S.A. (See IJ web site Jan. 5). The transaction, which is subject to regulatory approval, is expected to close in the second quarter of 2007, along with QBE’s (See IJ web site Dec. 13, 2006).

In a separate announcement (see following article) Best said the planned acquisition would have no affect on the ratings of Winterthur Group (Switzerland).

Best said: “All of the ratings will remain under review to enable A.M. Best to assess the combined impact of the planned acquisitions of Winterthur U.S. Group and Praetorian Financial Group.”

The rating agency indicated that it “expects a level of support to be provided by QBE Re’s ultimate parent, QBE Insurance Group Limited, to fund both transactions.

“The positive implications for Winterthur U.S. Group are reflective of its excellent capital position, strong regional market presence accompanied by a solid agency franchise and increased operational performance led by improved underwriting results. These core strengths are reinforced by the proposed acquisition by QBE.”

The FSR of “A” (Excellent) and the ICRs of “a” of the New York-based QBE Re Group U.S. and its members “were placed under review with negative implications following the announcement of the acquisition of Praetorian Financial Group,” Best noted. “Those ratings and their under review status have been affirmed, while the ratings for the Praetorian Financial Group, which are also under review with developing implications, remain unchanged.”

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