A.M. Best Comments on Financial Strength and Debt Ratings of American Re.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--March 8, 2004 A.M. Best Co. has commented that the financial strength rating of A+ (Superior) of American Re-Insurance Company and its direct subsidiaries, collectively American Re Corporation Group (American Re) (Princeton, NJ), are unaffected by the recent pre-tax charge of $368 million covering additional reserve strengthening for the 1997-2001 accident years. The rating of the group had already contemplated a sizeable reserve deficiency reserve deficiency A shortage in funds set aside as a reserve for a specific purpose. For example, during a recession a firm may find the reserve fund covering allowance for bad debts deficient when the amount of bad debts exceeds expectations. ; therefore, the company's stand-alone capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. remains supportive of the group's superior financial strength rating. Despite the charge, American Re Group reported robust earnings in 2003, which together with a capital contribution of $300 million from its ultimate parent and unrealized capital gains, augmented statutory surplus by $1.1 billion to $3.34 billion at the end of 2003. Further, during the period, American Re executed a significant novation The substitution of a new contract for an old one. The new agreement extinguishes the rights and obligations that were in effect under the old agreement. A novation ordinarily arises when a new individual assumes an obligation to pay that was incurred by the original party which, together with other actions, resulted in a net decline in the company's carried reserves. As a significant player in the U.S. professional reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. market, American Re has benefited from improved market conditions as reflected by improved earnings; current accident year trends are very favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. thus far and are in line with the U.S. reinsurance sector. A.M. Best believes that as a strategically important subsidiary, American Re will continue to benefit from the ongoing commitment of Munich Re Munich Re AG, in German Münchener Rück AG (ISIN: DE0008430026), is the world's second largest reinsurance company with over 5,000 customers in 160 countries and has its headquarters in Munich, Germany. , which will enable the group to further strengthen and maintain its capital position at a level commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with its current rating. The financial strength rating of A+ (Superior) of the following subsidiaries of American Re Corporation Group are unaffected: -- American Re-Insurance Company -- American Alternative Insurance Corporation -- Princeton Excess & Surplus Lines Insurance Company The senior debt rating of "a-" for the following security is unaffected: American Re Corporation-- -- $500 million 7.45% senior unsecured notes, due December 15, 2026 For current Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , independent data and analysis on more than 470 reinsurance companies, please visit http://www3.ambest.com/reinsurance/. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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