A.M. Best Lowers Financial Strength Ratings of American Re-Insurance Company and its Subsidiaries and Lowers Debt Rating of American Re Corporation.

Business Editors/Insurance Writers

OLDWICK, N.J.--(BUSINESS WIRE)--Dec. 6, 2002

A.M. Best Co. has lowered the financial strength ratings to A+ (Superior) from A++ (Superior) on the member companies of American Re Corporation (Princeton, NJ). Concurrently, A.M. Best has also lowered to "a+" from "aa" the senior unsecured debt rating on securities issued by American Re Corporation. The outlook for all the ratings is stable.

A key factor underpinning these rating actions is the weak operating performance of American Re over the past four years. As a result, A.M. Best has changed its view of American Re's rating status relative to its parent, Munich Reinsurance Company (Munich Re) from "core" to "strategic" as defined by Best's group rating methodology. However, the assignment of the A+ (Superior) ratings reflects the financial flexibility and continued explicit support American Re receives from Munich Re -- which remains rated A++ -- and the Company's strategic importance to its parent, serving as its sole non-life reinsurance operating platform in the United States, the world's largest reinsurance market.

American Re's consolidated risk-adjusted capital has been adversely impacted by a series of reserve strengthening actions, the most recent a US $2 billion increase in the second quarter of 2002, addressing the 1997-2001 accident years for workers compensation, general liability, finite reinsurance and strengthening the Company's A&E survival ratio. Despite this reserve strengthening, however, American Re remains subject to uncertainty stemming from asbestos and environmental claims, as do other commercial insurers and reinsurers in the United States.

To strengthen American Re's risk-adjusted capitalization to a level commensurate with the group's current and prospective market position, Munich Re contributed an additional US $1.4 billion of capital to American Re Corporation in the third quarter of 2002. Additionally, Munich Re has provided substantial reinsurance support to the Company in the form of a quota share over its entire book of business, stop-loss reinsurance protection covering adverse reserve development relating to losses incurred from the events of September 11, and an accident year stop loss cover.

While these measures have bolstered American Re's capital position, A.M. Best believes the consistent generation of strong underwriting results and earnings will be needed to restore its core rating status. To date, American Re's new management has introduced stricter underwriting criteria which, when coupled with a more favorable pricing environment, has led to a marked improvement in American Re's current accident year's underwriting results. The financial strength ratings have been lowered to A+ (Superior) from A++ (Superior) for the following subsidiaries of American Re Corporation Group:

-- American Re-Insurance Company

-- American Alternative Insurance Corp.

-- Princeton Excess & Surplus Lines Insurance Co.

The following senior unsecured debt securities have been downgraded to "a+" from "aa":

American Re Corporation --

-- Senior unsecured 7.45% $500 million, due December 15, 2026

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.