A.M. Best Affirms QBE Group Ratings

January 16, 2002

In three separate, but related, actions A.M. Best Co. has affirmed the A- (Excellent) financial strength rating of QBE Reinsurance Europe, QBE International Insurance Ltd. and another subsidiary, Iron Trades Ins. Co. Ltd. (ITIC). Best also removed the QBE companies from its review status, where they were placed on Sept. 21.

QBE Re’s “rating reflects the support and commitment of QBE and A.M. Best’s belief that QBE Re plays an important role in the group’s European strategy,” said the announcement. “At year-end 2000, QBE Re’s shareholders’ funds of USD 245.4 million supported net written premiums of USD 188.9 million. QBE Re’s exposure to the WTC disaster is minimal; therefore, A.M. Best does not forecast immediate capital requirements. However, should any capital needs arise, A.M. Best believes QBE Re’s ultimate parent will most likely be willing to maintain a capital base supportive of the current rating,” it continued.

The report on QBE International , in addition to pointing out its importance to the Group, also stressed the company’s excellent capitalization. According to A.M. Best’s risk-based adjusted capital model QBE raised $340 million through an equity placing and subsequently injected $145 million into QBE International to replenish its capital position following losses incurred in the WTC disaster. A.M. Best forecasts growth in shareholders’ funds of approximately 10% in 2002 to £314 million ($455 million) through retained profits, “which is sufficient to maintain the company’s excellent capitalisation in the short-term.”

Best also noted QBE International’s “improving business position through rationalised risk selection and significantly harder rating environment,” noting that it “has revised its business strategy and will focus on less volatile business in 2002.”

Iron Trades rating also” reflects the company’s excellent capitalisation, improved business position, less volatile investment strategy and improving operating performance,” said Best’s announcement. It also noted that ITIC benefits from the support and commitment of its ultimate parent company, QBE Insurance Group Limited, Australia.” Best did note a that offsetting factors it considered were “the company’s historically poor operating performance, albeit mainly attributable to discontinued lines, and the challenge presented by a still overly competitive UK employers’ liability market.”

Overall A.M. Best indicated confidence in Australia’s QBE and its individual group members, as reflected in the ‘A-‘ ratings, and expects them to continue to raise profits in 2002.

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