As you will be aware, British Marine's results are now subsumed into those of QBE Insurance Group ("QBE") and therefore form part of QBE's overall result. However, we have undertaken to continue to advise on British Marine's development and progress by way of an annual commentary, as we continue to underwrite from Luxembourg. This enables a consideration of British Marine's performance within the context of the marine market generally and the International Group in particular. We hope that you will find this both helpful and instructive.

As some of you will have seen reported, for the year ended 31st December 2007 QBE announced a record net profit after tax of A$1.925 billion, an increase of 30% over 2006. Return on equity equated to 26% of average shareholders' funds, and QBE's gross assets now stand at A$39.6 billion. As a core QBE business, we are proud that our shipowners and clients can now benefit from such security. Looking specifically to the performance of British Marine, the 12 months to the 31st December 2007 saw continued strong performance. Profit after tax was US$21 million and the combined operating ratio was 91%. Gross premium income increased by 10% to US$172 million.

The traditional February P&I renewal season has yet again continued the strong performance. We saw a 97% retention of our 20th February P&I renewals with an average 4.5% increase in premium paid by the same renewing client base. New business accounted for a further increase in premium of 24%.

British Marine has entered 2008 stronger than ever. As price volatility infiltrates the traditional Protection and Indemnity markets, British Marine provides a secure haven in which owners can be certain that they will be asked to pay a premium reflecting their performance alone, uninfluenced by the performance of others. As the Hull market continues to grow more uncertain, so the security of insuring Hull and Machinery 100% with British Marine grows more attractive. We also look forward to continuing to develop our Intermodal and Professional Liability classes within our growing insurance base. We will continue through 2008 to seek to explore and develop new insurance product within QBE, and we look forward to discussing these further opportunities with you, and to continuing to provide you with both a secure and personal service.

Yours sincerely,

Robert Johnston
For and on behalf of

British Marine Managers Limited