A.M. Best Affirms Ratings of QBE Insurance Group Limited and Its Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength ratings of A (Excellent) and issuer credit ratings (ICR) of "a+" of QBE Insurance (Europe) Limited (QBE Europe) (United Kingdom), QBE Insurance (International) Limited (QBE Intl) (Australia) and QBE Reinsurance (Europe) Limited (QBE Re) (Ireland). 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, for which A.M. Best has also affirmed its ICR of "bbb+". A.M. Best has also assigned an ICR of "bbb-" to the GBP 300 million 6.857% perpetual preferred securities issued by QBE Capital Funding L.P. (Jersey) and guaranteed by QBE. At the same time, A.M. Best has affirmed the "bbb" debt rating on the USD 250 million 5.65% subordinated notes due 2023; the "bbb+" debt rating on the GBP 175 million 5.625% senior notes due 2009 (both issued by QBE); and the "bbb+" debt rating on the USD 375 million 20-year zero coupon senior convertible securities due 2024 issued by QBE Funding Trust III Ltd. and guaranteed by QBE. The outlook for all ratings is stable.

A.M. Best anticipates that QBE will maintain excellent consolidated risk-adjusted capitalisation during 2006, taking into account likely future dividend payments and strong retained earnings. Furthermore, A.M. Best believes QBE's prudent reserving strategy is likely to result in continued favourable reserve development during 2006 and 2007. QBE also derives significant financial flexibility from its access to the financial markets. In July 2006, GBP 300 million (USD 558 million) was raised through an issue of perpetual securities in order to repay the short-term bank debt raised to finance acquisitions made in 2005 and to fund future growth.

A.M. Best believes consolidated earnings are likely to remain strong in 2006 with a return on capital and surplus likely of approximately 20%. Overall profitability is likely to be supported by solid investment income and a strong underwriting performance in each of QBE's core regions. A.M. Best believes QBE's excellent half-year performance (including a combined ratio of 87.9% and profit after tax of AUD 591 million (USD 450 million)) is likely to be maintained at year-end 2006 with an anticipated combined ratio of approximately 90% (compared to 88.9% in 2005). This strong performance also reflects an overall increase of rates during the year, in line with QBE's renewal experience during the first six months (which saw an increase of 6.5%).

In A.M. Best's opinion, QBE has an excellent business profile, benefiting from a well diversified commercial lines portfolio (both geographically and by line of business). QBE operates from a leading position on most accounts written on a global basis across its five main markets (the Americas, Asia-Pacific, Europe, Lloyd's and the United Kingdom). A.M. Best anticipates growth in QBE's gross premiums written of approximately 10% to AUD 10.5 billion (USD 8 billion) in 2006, reflecting increased premium from acquisitions in 2005, particularly National Farmers Union Property and Casualty Company in the United States and British Marine in the United Kingdom. The increase also reflects improved rates for property catastrophe, marine and energy due to the effects of the 2005 U.S. hurricane season.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.