A.M. Best Affirms Ratings of QBE Insurance Group Limited.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating (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. A.M. Best has also affirmed the ICR of "bbb+" and all debt ratings of QBE. (See below for a detailed list of the debt ratings.) In addition, A.M. Best has assigned a rating of "bbb-" to the USD 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.

A.M. Best believes QBE will maintain its excellent consolidated risk-adjusted capitalisation 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 rating also factors continuation of QBE's prudent reserving, which A.M. Best believes is likely to result in favourable reserve development during 2007 and 2008. In addition, the USD 550 million perpetual securities issue in May 2007 highlights QBE's strong financial flexibility.

A.M. Best anticipates strong underwriting performance across all regions of the QBE group during 2007, resulting in an excellent combined ratio below 90% (compared to 84% in 2006). This performance factors an overall decrease in rates during the year of up to 5% and a stable net expense ratio of below 30%. 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%.

A.M. Best 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% (from AUD 10.4 billion [USD 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.

The following debt ratings have been affirmed:

    QBE Insurance Group Limited---
    -- "bbb" on the USD 250 million 5.65% subordinated notes, due 2023
    -- "bbb+" on the GBP 175 million 5.625% senior unsecured notes,
        due 2009
    -- "bbb-" on the GBP 300 million 6.857% perpetual preferred
        securities issued by QBE Capital Funding L.P. (Jersey) and
        guaranteed by QBE
    -- "bbb+" 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

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.