Best Affirms QBE Group Ratings

June 26, 2007

A.M. Best Co. has affirmed the financial strength rating of “A” (Excellent) and issuer credit rating (ICR) of “a+” of UK-based QBE Insurance (Europe) Limited, Australia’s QBE Insurance (International) Limited, and Ireland’s QBE Reinsurance (Europe) Limited (QBE Re). “These companies are regarded as key operating subsidiaries of QBE Insurance Group Limited (QBE) (Australia), the non-operating holding company of the QBE group of companies,” said Best.

The rating agency also affirmed the ICR of “bbb+” and all debt ratings of QBE, and assigned a rating of “bbb-” to the US$550 million perpetual preferred securities issued by QBE. The outlook for all these ratings is stable. The ratings of all other QBE group companies remain unchanged.

Best said it “believes QBE will maintain its excellent consolidated risk-adjusted capitalization during 2007 and 2008 despite integration risk relating to its acquisition of Praetorian Financial Group and QBE Regional Insurance Group (formerly Winterthur US Group) in the United States. QBE has extensive experience integrating acquired companies.”

The ratings are also based on QBE’s prudent reserving, which, Best said it “believes is likely to result in favorable reserve development during 2007 and 2008. In addition, the US$ 550 million perpetual securities issue in May 2007 highlights QBE’s strong financial flexibility.”

Best also anticipates strong underwriting performance across all regions of the QBE group during 2007. The combined ratio is expected to be below 90 percent (compared to 84 percent in 2006). “This performance factors an overall decrease in rates during the year of up to 5 percent and a stable net expense ratio of below 30 percent,” Best explained. “Combined with solid anticipated investment income during the year, QBE’s consolidated earnings are expected to remain strong, supporting a return on capital and surplus of approximately 20 percent.”

Best also indicated that it believes “QBE’s excellent business profile has been strengthened following the recent acquisitions and anticipates an increase in its overall gross premiums written during 2007 of approximately 30 percent (from AU$ 10.4 billion [US$ 8.2 billion] in 2006). These acquisitions will improve QBE’s distribution in the United States, especially in regional markets for both personal and commercial business.”

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