S&P: Affirms QBE’s Ratings; Praetorian Upgraded to Core Status

July 2, 2008

Standard & Poor’s Ratings Services has affirmed its insurer financial strength and counterparty credit ratings on holding company QBE Insurance Group Ltd. (currently rated ‘A-‘) and QBE’s core operating entities (all rated A+). The rating outlooks on the holding company and all the core entities are stable.

S&P also upgraded QBE’s U.S. subsidiaries, Praetorian Insurance Co. and Redland Insurance Co. (collectively Praetorian), and Praetorian Financial Group Inc. (PFG) to core entities of the group. As a result Praetorian’s ratings have been raised to ‘A+’ from ‘A’, and the rating on PFG has been raised to ‘BBB+’ from ‘BBB’. The outlooks on these companies were revised to stable from positive. “The ratings on Praetorian and PFG have been equalized with that on QBE group following QBE group’s success in integrating the Praetorian business in a timely manner,” S&P noted.
S&P also affirmed its ‘A’ rating on the operating companies of QBE Regional Companies (N.A.) Inc. (QBE Regional, previously Winterthur US Holdings Inc.), and revised their outlook to positive from stable. “The positive outlook reflects our expectation that these companies will successfully further integrate its operations, underwriting, systems, and staff with those of the other U.S.-based businesses over the next two years,” S&P explained. “Success in doing this could result in the rating on these companies being equalized with that on the core entities of the QBE group.”

In its analysis of the QBE Group S&P noted that its “core operating entities are underpinned by QBE’s track record of solid underwriting and operating performance, well-diversified business profile, strong competitive position, robust underwriting and reserving practices, and supportive capitalization for the rating level. Also supporting the ratings is the group’s strong and improving enterprise-risk-management framework.

“Moderating the ratings are QBE’s limited market influence outside Australia, reasonable reliance on third-party reinsurance, and involvement in some high-risk lines of business.”

S&P credit analyst Derryl D’silva added: “QBE has a globally diverse business platform with a steadily improving competitive position in Europe and the Americas, which ensures earnings stability. The strong performance in fiscal 2007 has enabled the group to consolidate its reserving and capitalization levels, supporting the insurer’s ability to fund future acquisitions.”

S&P said: “An upward rating movement for QBE could arise from a further strengthening in its competitive position in key offshore markets, Europe and the Americas, combined with a higher level of risk-based group capitalization. Equally important would be the group’s ability to improve its strong risk management with the greater operational diversity.

“Although perceived as unlikely to occur, a failure to maintain good underwriting profitability, a weakening in the group’s overall competitive position, or a material operating risk issue could weaken the rating.”

The complete list of the Group’s ratings is as follows:
Ratings affirmed
QBE Insurance Group Ltd. A-/Stable/–
QBE Insurance (Australia) Ltd. A+/Stable/–
QBE Insurance (International) Ltd. A+/Stable/–
QBE Insurance (International) Ltd. (NZ Branch) A+/Stable/–
QBE Insurance (Europe) Ltd. A+/Stable/–
QBE Reinsurance (Europe) Ltd. A+/Stable/–
QBE Insurance Corp. A+/Stable/–
QBE Reinsurance Corp. A+/Stable/–
QBE Hongkong & Shanghai Insurance Ltd. A/Stable/–
Equator Reinsurances Ltd. A+/Stable/–
British Marine Luxembourg S.A. A+/Stable/–

Ratings raised; Outlook revision
To From
Praetorian Financial Group Inc. BBB+/Stable/– BBB/Positive/–
Praetorian Insurance Co. A+/Stable/– A/Positive/–
Redland Insurance Co. A+/Stable/– A/Positive/–
Ratings affirmed; Outlook revision
Operating companies of QBE Regional Companies (N.A.) Inc.
(Ratings were all affirmed at ‘A’ and outlooks were revised to positive from stable)
Blue Ridge Indemnity Co. A/Positive/– A/Stable/–
Blue Ridge Insurance Co.
General Casualty of Wisconsin
Hoosier Insurance Co.
MassWest Insurance Co.
Regent Insurance Co.
Southern Fire & Casualty Co.
Southern Guaranty Insurance Co.
Southern Pilot Insurance Co.
Unigard Indemnity Co.
Unigard Insurance Co.
General Casualty Co Illinois
Unigard Pacific Insurance Co.

Source: Standard & Poor’s – www.standardandpoors.com

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