S&P Assigns ‘A-‘ Rating to QBE Debt Securities

September 22, 2004

Standard & Poor’s Ratings Services announced that it has assigned its “A-” senior debt rating to Australian insurer QBE’s Funding Trust III’s US$375 million 20-year zero coupon senior convertible securities (SCS).

“QBE Funding Trust III was established specifically for the issuance of these securities,” S&P explained. “The rating on these securities is supported by a guarantee from QBE Insurance Group Ltd. (QBE), which has a long-term counterparty credit rating of ‘A-‘, reflecting the holding company’s structural subordination to the higher rated insurance operating subsidiaries at ‘A+’,” noted S&P credit analyst Paul Clarkson.

“QBE’s capitalization remains supportive of the rating following the provision of this guarantee,” the bulletin continued. “The issue does not materially impact the funding profile of the group, with QBE’s leverage position remaining consistent with its ‘A-‘ rating. QBE has earmarked the proceeds from the debt issuance to assist in the repayment of the bridging facility for the acquisition of the Australian general insurance operations of ING and to support Lloyds’ syndicate capacity.”

“The ratings on the insurance operating subsidiaries of QBE reflect the group’s very good underwriting and operating performance, diverse business profile, solid underwriting and reserving practices, and adequate capitalization for the rating level,” Clarkson observed.

“Moderating features include the group’s reliance on third-party reinsurance and involvement in higher risk financial lines of business. QBE’s credit standing benefits from the portfolio effect of combining a diverse set of businesses around the globe, whose financial strength and competitive position varies, with the combined businesses demonstrating considerable strength and flexibility,” S&P concluded.

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