Investor sentiment for the rate story has been very mixed with some pointing

towards irrational behaviour from the likes of AIG as holding back rates. We think

this survey result should leave those doubtful of the thematic as far as Australian

trends go very clear that premium rates are rising. Importantly, in this survey the

broker community is even reporting solid rate increases in the liability classes, a

segment that has lagged to date. In the Professional Indemnity (PI) class brokers

noted increases in 59% of cases versus 31% at Jan 09. In Director’s and Officers’

55% of brokers indicated price increases versus 29% at June 09. Anecdotal

feedback has been that these classes would be likely to show increases at Dec

09 so these signs are encouraging in the context of the deteriorating economic

environment and increasing litigation risks. We continue to believe in the ‘pricing

power’ thematic (just a slow, gradual, incremental uptick rather than thumping rate

increases) and our preferred exposure remains QBE (QBEIF, $19.38, B17). While

the premium rate story ex Australia is more sporadic, we expect it to slowly build.