S&P Afms QBE Insurance Rtgs After Joint Venture Plan Insurance Ratings Service.

Business Editors

MELBOURNE--(BUSINESS WIRE)--Standard & Poor's

March 6, 2001-- Standard & Poor's today affirmed its single-'A'-plus insurer financial strength and counterparty credit ratings on various underwriting entities of QBE Insurance Group Ltd. (QBE) following the announcement that it has agreed in principle to the formation of a joint-venture company with HIH Insurance Ltd. (HIH). The joint venture, QBE Corporate Insurances Ltd., will offer to renew corporate insurances such as workers' compensation and professional liability written through major brokers in Australia and New Zealand, and will be 60% owned by QBE and 40% owned by HIH. The rating outlook remains stable.

The affirmation is based on our assessment that QBE has the financial flexibility to fund its share of the proposed A$300 million initial shareholders' funds of the joint venture, and maintain appropriate solvency levels for the proposed net premium income of A$700 million. "While a material business development and capital investment, especially in the context of the Australian market, the joint venture will only represent less than 15% of the QBE group's capital base and net premium levels on a global basis," commented Michael Vine, director, Financial Services Ratings. In addition, QBE will have no exposure to past or existing liabilities of HIH as the joint venture will only write new or renewal business. Although there are risks of successfully assimilating an acquisition or joint-venture arrangement, QBE has a demonstrated history of successfully acquiring and integrating operations, and in this instance, has the benefit of strong market knowledge, experienced technical skills, and full management control.

Standard & Poor's anticipates that the joint venture will have the business profile, appropriate capital structure, and support of QBE, which will enable it to achieve a rating in the single-'A' category. The establishment of the joint venture and its proposed rating, however, remain subject to regulatory approvals and other conditions being met. Standard & Poor's will continue to monitor these developments in the establishment of the joint venture.

The ratings on the Australian operating entities of HIH remain at triple-'B'-minus/CreditWatch Negative' pending finalization of the amount and composition of HIH's half-year result, the outcome of the strategic review currently underway, and the extent to which the strategic review results in a supportive capital position, Standard & Poor's said. -- CreditWire