QBE INSURANCE GROUP LIMITED MARKET ANNOUNCEMENT

QBE ANNOUNCES ACQUISITION OF WINTERTHUR US HOLDINGS INC

QBE Insurance Group today announced the acquisition of Winterthur US Holdings Inc (“Winterthur US”), a property and casualty insurer in the USA mainly trading under the names of General Casualty and Unigard. This acquisition completes QBE’s strategy of building four major streams of business in the Americas: specialist insurance programs, property and casualty insurance in regional markets, reinsurance and Latin America. The acquisition of Winterthur US is subject to regulatory approval. Winterthur US is based in Wisconsin and writes property and casualty insurance risks through 1,700 independent agents in 33 states of the US. Gross premium income for 2007 is expected to be around US$1.45 billion. The estimated 2006 combined operating ratio and profit after tax, before interest on borrowings and after unrealised gains on investments, are 95.8% and US$124 million respectively. Interest on borrowings is estimated at US$30 million and unrealised gains are US$13 million, both after tax. Winterthur US employs 2,150 staff and has an excellent infrastructure for the expansion of our property and casualty insurance stream. The purchase price for Winterthur US is US$1.16 billion and net tangible assets at date of acquisition are expected to be US$0.78 billion. The net tangible assets include debt due to the seller which will be refinanced by QBE. QBE will fund the acquisition of Winterthur US and the recently announced acquisition of Praetorian Financial Group largely through a combination of existing excess capital, dividend reinvestment and short term debt, with the balance from an equity placement. The Group’s debt to equity ratio will remain around 40%. The acquisitions are expected to be completed in the second quarter of 2007. The acquisition will form part of QBE the Americas under Tim Kenny, President and Chief Executive Officer. Frank O’Halloran, QBE Group Chief Executive Officer, said “Winterthur US gives us a strong footprint in western, mid-west and north-east US states for small to medium property and casualty business through a large base of independent agents. By contrast, the Praetorian acquisition announced in December will more than double the size of our US specialist insurance program business.” He added “the acquisition of Winterthur US meets QBE’s acquisition criteria; in particular earnings per share accretion in year one. Subject to no unforeseen circumstances, we anticipate profit after tax of US$160 million from Winterthur US in the first full year before the cost of funding and synergies.” Tim Kenny said “the acquisition of Winterthur US furthers our focused diversification strategy and completes our infrastructure needs and distribution requirements for the US. We now have a strong presence in specialist insurance programs, property and casualty insurance and reinsurance together with an increasing presence in Latin America. Annualised gross premium income for QBE the Americas is now expected to be around US$4.6 billion or slightly less than 40% of QBE Group gross premium income.” More details of the acquisition are provided in the supplementary information attached. For further information, please contact: Frank O’Halloran, Chief Executive Officer - +61 2 9375 4400 Neil Drabsch, Chief Financial Officer - +61 2 9375 4216 Tim Kenny, President and CEO, the Americas +1 212 894 7543 5 January 2007

MARKET ANNOUNCEMENT

SUPPLEMENTARY INFORMATION

ACQUISITION OF ACQUISITION OF WINTERTHUR US HOLDINGS INCWINTERTHUR US HOLDINGS INC..

5 January 2007

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• Commenced US operations in 1982 acquiring a number of established regional companies.

• Operates through two distinct underwriting divisions:- General Casualty Co. of Wisconsin (“General Casualty”)- Unigard Insurance Co. (“Unigard”)

• Products are distributed through an independent agency system with over 850,000 policyholders.

• The head office of Winterthur US and General Casualty is Sun Prairie, Wisconsin. Unigard’s head office is in Bellevue, Washington State.

• The Winterthur US infrastructure is well developed with around 2,150 employees, established and proven distribution, robust and mature administration and IT systems and a qualified and experienced team of insurance professionals.

Winterthur US overview

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Winterthur U.S. Fund, Inc.

Winterthur North America, Inc.

Republic Financial Services, Inc.

Winterthur Investment Mgmt. CorpUnigard Indemnity Co. Unigard Pacific Ins. Co.

Unigard Insurance Co.

Unigard, Inc

General Casualty Co.of Illinois

Regent Insurance Co.

Hoosier Insurance Co. Blue Ridge Ins. Co.

Mass West Ins. Co. Blue Ridge Indemnity Co.

Southern Guaranty Ins. Co. Souther Pilot Ins. Co.

Southern Guaranty Ins. Co. of Georgia

Southern Fire & Casaulty Co.

General Casualty Co.of Wisconsin

WinterthurU.S. Holdings, Inc.

Insurance Entity

Non-Ins Entity

Corporate structureWinterthur US overview

*

Southern Pilot Ins .Co.

* Winterthur U.S. Fund Inc. and interest in three affiliated limited partnerships are to be sold prior to completion

Unigard, Inc

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• Winterthur US writes US$1.48 billion of gross written premium through 1,700 agents in 33 states. Net earned premium is US$1.41 billion.

• Winterthur US employs a “Super Regional” distribution strategy focused on agency relationships consisting of suburban and rural community independent agents and selected regional agents. Agents are rewarded for outstanding underwriting results and service performance.

• Winterthur US focuses primarily on small to medium sized commercial business and personal lines accounts that are above average in sum insured value. There is a focus on short tail business. Winterthur US generally avoids longer tail exposures such as higher layer excess, stand alone umbrella and large industrial and manufacturing accounts.

Winterthur US overview

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Winterthur US acquisition• The acquisition of Winterthur US meets one of QBE’s major objectives in

developing scale and infrastructure to support QBE in its US property and casualty primary insurance strategy.

• QBE’s US growth strategy is to acquire primary insurance business with a focus on small to medium regional business through agency and specialist program distribution channels.

• The acquisition provides QBE with an agency market infrastructure and greatly enhances our US product and geographic diversity.

• The acquisition is highly complementary to the recently announced acquisitions of Praetorian, National Farmers Union and the OneBeacon agricultural business.

• Together with QBE’s existing US specialist program business, the acquisition creates a strong distribution structure with a significant share of the agricultural, middle market, managing agent programs and specialist insurance markets.

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Winterthur US acquisition

2005 US$’m

2006 Estimated US$’m

Gross written premiums 1,476 1,480

Net earned premiums 1,433 1,410

UNDERWRITING PROFIT 69 58

INV INCOME - INSURANCE FUNDS 38 64

INSURANCE PROFIT 107 122

INV INCOME – SHAREHOLDERS’ FUNDS 4 2

PROFIT BEFORE TAX 111 124

LESS: INCOME TAX (15) 43

PROFIT AFTER TAX (a) 126 81

RATIO ANALYSIS:Net lossNet commissionNet expenseCombined operating ratio

64.1%17.0%14.0%95.1%

65.7%16.0%14.1%95.8%

Financials - underwriting and income statement

(a) Includes interest on debt with parent of $31m and $30m in 2005 and 2006 respectively and excludes unrealised gains on investments of $13 million in 2006.

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• 2005 net written premium US$’m GeneralCasualty

116250

Commercial packages 327 95 422244193

Other 6 1 7

Commercial lines 67% 54% 64%Personal lines 33% 46% 36%

Combined Operating Ratio- 2005- 2006 (estimated)

97.9%98.0%

83.1%84.0%

95.1%95.8%

1,136

Unigard TotalHomeowners 61 177Personal auto 66

Workers compensation - 244Commercial auto 58 251

Total 281

316

1,417

Major lines of business

Winterthur US overview

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Homeowners13%

Personal Auto22%

Workers Comp17%

CommercialMulti-peril

30%

Commercial Auto18%

General Casualty & UnigardClass of Business - 2005 net written premium

Winterthur US overview

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Unigard

General Casualty

States writtenWA

OR

CA

ID

NV

AZ

UT

MT

WY

CO

NM

TX

OK

ND

SD

NE

KS

MN

IA

MO

AR

LA

MS AL GA

FL

SC

NC

VAKY

WV

WIMI

IL IN OHPA

NY MA

MD

NJDE

VT MENH

CTRI

TN

Winterthur US overview

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Winterthur US overview

• Well balanced high quality book of commercial business.

• Both General Casualty and Unigard focus on retail, service industries and low hazard manufacturing.

• General Casualty has an emphasis on contractors and Unigard targets the agricultural market.

• Agencies are offered web based capability for quoting and online processing for the majority of small business lines.

• Workers compensation is profitable (only written by General Casualty) and is only offered in states with favourable workers compensation environments.

Workers Compensation

25.3% Commercial Property &

Liability47.4%

CommercialAuto

27.3%

2005 GWP: US$955m

GWP by Line of Business

Commercial Lines

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Winterthur US overview

• Broad selection of personal lines offered through local independent agencies including products such as preferred and standard auto, homeowners, non standard auto, dwelling fire, umbrella and recreational vehicles and boats.

• Winterthur US withdrew from personal lines in 7 states in 2004 to focus on 23 states to achieve pricing adequacy, low cost of acquisition, geographic desirability and strong agency commitment.

• Utilises web based interface systems for premium and claims processing with agencies.

Personal Lines

PersonalProperty36.0%

Other Personal Lines1.7%

Personal Auto62.3%

2005 GWP: US$521m

GWP by Line of Business

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General Casualty Unigard

Workers Compensation Only as part ofcommercial package

None

Main Industry Midwest Contracting15% of portfolio

Agriculture22% of portfolio

Personal vs. Commercial 33% / 67% 46% / 54%

Territory Midwest, Southeast & Northeast

Northwest, West and Mountain regions

Branding Over 80 yrs in 25 states Over 100 yrs in 8 statesCustomer retention ratio 83% 87%

Number of producers 1,430 268

General Casualty & Unigard differentiation

Winterthur US overview

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General CasualtyCommercial Lines GWP Mix –

Line of Business MixPersonal Lines GWP Mix –

Line of Business Mix

Homeowners28%

Dwelling Fire1.6%

Automobile67.1%

Personal Umbrella1.5%

CommercialMulti-Peril

31.7%

Other Casualty7.9%

Business Auto25.4%

WorkersCompensation

30.6%

Other Property4.4%

Inland Marine1.2%

Boat Owners0.6%

2005 GWP: US$791 million 2005 GWP: US$385 million

Winterthur US overview

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UnigardCommercial Lines GWP Mix –

Line of Business MixPersonal Lines GWP Mix –

Line of Business Mix

Homeowners39.8%

Dwelling Fire9.3%

Automobile50.0%

Umbrella etc0.9%

CommercialMulti-Peril

45.1%

Other Liability11.3%Business Auto

36.7%

Other Property6.9%

2005 GWP: US$164 million 2005 GWP: US$136 million

Winterthur US overview

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• Acquisition of Winterthur US Holdings Inc. and subsidiary companies

• Cost: US$1,156 million

• Estimated net tangible assets acquired on completion are US$780 million, giving “goodwill” on purchase of US$376 million

• Estimated net tangible assets include intercompany borrowings ofUS$557 million from the parent as debt. QBE will repay this debt to the Winterthur US parent company on completion

• Estimated net tangible assets on completion are after additionalrisk margins in outstanding claims

• Claims reserves on completion are undiscounted and are estimated to include risk margins that result in a slight decrease of less than 0.5% on the Group’s probability of adequacy of outstanding claims using Australian IFRS which was 95% at 30 June 2006.

Winterthur US acquisitionTransaction highlights

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Winterthur US acquisitionFinancials

US$’mAssets:

Investments & Property 2,750

Other assets 1,030

Intangibles -

3,780Liabilities:

Insurance provisions 2,250

Borrowings * 600

Other liabilities 150

3,000

Net assets 780*Borrowings includes the following:

Due to Winterthur US parent 557

Short term notes due: 15 Nov. 2007 @ 4.22% p.a. 21

1 April 2009 @ 4.71% p.a. 22

600

Projected Winterthur US balance sheet on completion

Completion is expected effective 1 June 2007

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Winterthur US acquisition

The acquisitions of Praetorian and Winterthur US are expected to be funded as follows:

US$’m Winterthur US Praetorian Total

Cost of acquisitions 1,156 800 1,956

Parent loan repayment 557 - 557

New capital - 200 200

Total US$’m 1,713 1,000 2,713

A$ equivalent 3,480

Funded by:

Short term debt 1,385

Long term tier 1 debt 250

Dividend reinvestment 500

QBE share placement 800

Own cash resources 545

3,480

Acquisition funding

Key ratio targets post completion:• Debt to equity around 40%• Minimum capital multiple 1.9 times

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Major benefits to QBE• Strong footprint in Regional / Super Regional markets

• Two well regarded established insurance brand names namely General Casualty and Unigard

• Portfolios with high renewal retention

• Long standing agency relationships

• Strengthens QBE’s US geographic profile with limited catastrophe loss exposure

• Provides agency market infrastructure for further product and geographic expansion

• The combined business creates a leading agricultural primary insurer when combined with QBE Agri and National Farmers Union

• Ability to cross sell QBE Group products

• Synergies of $25 million after tax expected by the end of 2008 including major areas such as IT infrastructure, premises, reinsurance arrangements and capital management

Winterthur US acquisition

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Full year Winterthur US target(Australian IFRS) Estimate

2006 (1)First full

year (3)

Gross written premium – US$’m

Expense ratio 14.1% 13.5%

Insurance profit ratio 8.7% 12.2%Tax expense rate 35.0% 33.0%

Net profit after tax – US$’m 124 160

1,480 1,450

Net earned premium – US$’m 1,410

Claims ratio 65.7% 63.5%Commission ratio 16.0% 16.0%

Combined operating ratio (COR) (2) 95.8%

1,380

93.0%

Winterthur US acquisition

(1) Estimate 2006 excludes the after tax interest cost of $30 million on the loan from Winterthur US parent and includes unrealised gains of $13 million

(2) 2006 result includes approximately 2% on the COR from net upgrade of claims for prior years and higher than average tornado and hail storm losses. Investment yields were affected by long dated bond portfolio during the year

(3) Target results for the first year after the date of completion exclude the costs of funding the acquisition and synergies

Notes:

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QBE the Americas strategy• The acquisition of Winterthur US and Praetorian businesses achieves two major

components of QBE’s US growth strategy:

- Winterthur US provides a well established infrastructure and distributionchannel in local agency commercial and personal business targeted at regional and midwest US.

- The Praetorian acquisition adds substantial scale to QBE’s specialist insuranceprogram business.

• QBE the Americas is now comprised of four business pillars:Full year targets *

1.

2.

3.

4.

GWPUS$’m

COR%

Property & casualty insurance primarily through independent agents

1,700 92%

Specialist insurance programs – commercial and personal lines 2,350 86%

Inwards reinsurance targeting US regional and provincial insurers 400 92%

Latin America direct insurance 150 96%

4,600 90%

• QBE the Americas growth strategy for the next two years will be focused on developing our Latin American business.

* Based on 2007 projections and full year premium targets for Praetorian and Winterthur US acquisitions