QBE Completes Funding for US Acquisitions

QBE Insurance Group Limited (QBE) announced today that it has completed the funding of the recently announced US acquisitions of Praetorian Financial Group and Winterthur US. This involved the successful issue to institutional investors of 20 years zero coupon Liquid Yield OptioN securities (“LYONs”) raising £258 million or approximately A$605 million net funds after expenses. 
 
The main features of these debt-based securities include: 
 
• The principal debt of £258 million is equal to a forward sale of approximately 10.7 million QBE ordinary shares at a premium of 80% to the 11 May 2007 closing price of A$32.00. This gives an initial issue price per share of A$57.60; 
 
• Interest accumulates at 6.1925% per annum; 
 
• Investors can request repayment at the end of 3, 5, 7, 10 and 15 years from the issue date. In this event, investors receive the principal debt plus accumulated interest (“accreted value”). QBE has the option to pay cash or equivalent value in QBE shares or a combination of both. QBE can redeem at any time after three years from the issue date. In this event (or upon maturity), investors are entitled to receive the greater of the accreted value or the market value of 10.7 million QBE shares; 
 
• Investors can also request repayment after QBE calls for redemption or specified corporate transactions such as a material transfer of QBE’s assets. In this event, investors receive 10.7million QBE shares; and 
 
• If the LYONs trade 30% above the initial issue price of A$57.60 plus accumulated interest at set times each six months, investors are entitled to an increase in the conversion rate to QBE shares equal to the dividends paid during the six month period. The LYONs will be included in QBE’s diluted earnings per share calculation from 30 June 2007. In accordance with Australian Accounting Standards, approximately 1% of the LYONs will be included as equity in Group shareholders’ funds, with the balance in liabilities. Mr Frank O’Halloran, QBE’s Chief Executive Officer, said “We are pleased to have completed 
the funding of our recently announced US acquisitions, with the equity component of the funding some A$400 million lower than originally anticipated. Completion of the acquisitions will take place as soon as final approvals are received from the US regulators. These are expected before the end of June 2007.” 
 
QBE is not intending to seek shareholder approval at this time for any issue of QBE ordinary shares under the terms of the LYONs. The issue will not be to an existing class of security holders. 
 
The offering has been made in accordance with Rule 144A under the US Securities Act of 1933. Neither the LYONs nor any securities issuable upon conversion, redemption or purchase have been or will be registered under the Securities Act of 1933, and may not be offered or sold in the United States or to US persons absent registration or an applicable exemption from registration. This notice does not constitute an offer to sell or the solicitation to buy the LYONs or any securities issuable upon conversion, purchase or redemption of the LYONs. 
 
For further information, please call + 61 2 9375 4226 or email investor.relations@qbe.com.