A.M. Best Revises ICR Outlook to Negative for QBE Insurance Group Limited and Its Main Subsidiaries

  A.M. Best Revises ICR Outlook to Negative for QBE Insurance Group Limited
  and Its Main Subsidiaries

Business Wire

LONDON -- November 15, 2012

A.M. Best Europe – Rating Services Limited has affirmed the financial strength
rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a+” of
QBE Insurance (Europe) Limited (United Kingdom), QBE Re (Europe) Limited
(United Kingdom) and QBE Insurance (International) Limited (Australia). These
companies are key operating subsidiaries of QBE Insurance Group Limited (QBE)
(Australia), the non-operating holding company of the QBE group of companies.
A.M. Best also has affirmed the ICR of “bbb+” and all debt ratings of QBE. The
outlook for all ICRs and debt ratings has been revised to negative from
stable. The outlook for all FSRs remains stable. (See below for a detailed
list of the debt ratings.)

The revised outlook follows the publication on 12 November 2012 of QBE’s
market update on its 2012 forecast results. A preliminary estimate of losses
from Hurricane Sandy of between USD 350 million and USD 450 million, as well
as an increase in projected prior year reserve strengthening for the full
year, has led the group to revise its projected insurance profit margin for
2012 to 8% from 12%. As a result, the previously anticipated recovery in
consolidated risk-adjusted capitalisation to a strong level, following
deterioration in 2011, is not expected to materialise by year-end 2012.

A.M. Best will closely monitor the development in the group’s risk-adjusted
capitalisation and performance over the next year. If consolidated
risk-adjusted capitalisation recovers to the level previously expected by A.M.
Best during 2013, the negative outlook could revert back to stable. The
absence of an improvement in consolidated risk-adjusted capitalisation or a
material decline in operating performance could lead to negative rating
actions.

The following debt ratings have been affirmed, and the outlook has been
revised to negative from stable:

QBE Insurance Group Limited—

- “bbb+” on USD 211 million 9.75% senior unsecured fixed rate notes, due 2014

- “bbb+” on GBP 191 million 10.00% senior unsecured fixed rate notes, due 2014

- “bbb+” on GBP 550 million 6.125% senior unsecured fixed rate notes, due 2015

- “bbb+” on USD 853 million 2.50% senior convertible securities, due 2030

- “bbb” on USD 250 million 5.647% subordinated notes, due 2023

- “bbb-” on USD 550 million 6.797% perpetual preferred securities (issued by
QBE Capital Funding II L.P. (Jersey) and guaranteed by QBE)

- “bbb-” on GBP 300 million 6.857% perpetual preferred securities (issued by
QBE Capital Funding L.P. (Jersey) and guaranteed by QBE)

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Key criteria utilised include: “Risk Management and the Rating
Process for Insurance Companies”; “Understanding Universal BCAR”;
“Understanding BCAR for Property/Casualty Insurers”; “Rating Members of
Insurance Groups”; “Catastrophe Analysis in A.M. Best Ratings”; “Equity Credit
for Hybrid Securities”; and “Insurance Holding Company and Debt Ratings”.
Best’s Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to
required disclosures: A.M. Best Europe - Rating Services Limited Supplementary
Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best
Company. Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more information,
visit www.ambest.com.

       Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best
Mathilde Jakobsen, +(44) 20 7397 0266
Senior Financial Analyst
mathilde.jakobsen@ambest.com
or
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Catherine Thomas, +(44) 20 7397 0281
Director, Analytics
catherine.thomas@ambest.com
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
 
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