A.M. Best Downgrades Ratings of American Re; Revises Outlook to Stable.OLDWICK, N.J. -- A.M. Best Co. has downgraded the financial strength rating to A (Excellent) from A+ (Superior) of American Re Corporation Group's (American Re) member companies, which include American Re-Insurance Company, American Alternative Insurance Corporation and The Princeton Excess & Surplus Lines Insurance Company (all domiciled dom·i·cile n. 1. A residence; a home. 2. One's legal residence. v. dom·i·ciled, dom·i·cil·ing, dom·i·ciles v.tr. 1. in Wilmington, DE). A.M. Best has also downgraded the issuer credit rating of American Re-Insurance Company to "a" from "aa-" and the senior debt rating of American Re Corporation to "bbb" from "a-". The outlook for all ratings has been revised to stable from negative. These rating actions have been precipitated by American Re's recent announcement that it has taken additional reserve strengthening of $180 million in the fourth quarter related to asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. exposure, culminating in $482.3 million pre-tax of prior-year adverse reserve development in 2004. The quality of American Re's risk-adjusted 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. and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. performance, as well as its earnings trend over the past five years, has been negatively affected by significant and repeated adverse development charges covering the 1997-2001 accident years, asbestos charges and catastrophe-related exposure. Despite the historical explicit and implicit support provided by its parent, 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. (Germany), in the form of capital infusions Capital infusion Often refers to the cross-subsidization of divisions within a firm. When one division is not doing well, it might benefit from an infusion of new funds from the more successful divisions. , stop loss covers and retrocessional arrangements, American Re's risk-adjusted capitalization and earnings performance remain below A.M. Best's expectations. In December 2004, A.M. Best revised American Re's rating outlook to negative from stable, citing the protracted pro·tract tr.v. pro·tract·ed, pro·tract·ing, pro·tracts 1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations. 2. period of weak underwriting performance on a calendar year basis and declining risk-adjusted capitalization despite the previous explicit support from Munich Re. While American Re's ratings and the stable outlook continue to reflect this benefit and anticipated future support, the amount of rating enhancement has decreased due to the continued poor earnings performance of American Re. The financial strength rating of A+ (Superior) has been downgraded to A (Excellent) for the following subsidiaries of American Re Corporation Group: --American Re-Insurance Company --American Alternative Insurance Corporation --The Princeton Excess & Surplus Lines Insurance Company The issuer credit rating has been downgraded to "a" from "aa-"of American Re-Insurance Company. The issuer credit rating has been downgraded to "bbb" from "a-"of American Re Corporation. The following debt rating has been downgraded: American Re Corporation-- -- to "bbb" from "a-" on $500 million 7.45% senior unsecured notes, due 2026 For Best's Debt Ratings, all other 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. , an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings. For current Best's Ratings, independent data and analysis on more than 470 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. companies, please visit http://www.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 http://www.ambest.com. |
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