A.M. Best Places Cologne Re Group Ratings Under Review.OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 26, 1999--A.M. Best Co. today placed the A+ (Superior) ratings of Cologne Cologne (kəlōn`), Ger. Köln, city (1994 pop. 962,500), North Rhine–Westphalia, W Germany, on the Rhine River. It is a commercial, financial, and industrial center, a rail and road junction, and a river port. Re Group, Germany, and its U.S. life affiliate, Cologne Life Re, Stamford, Conn., under review with developing implications. The action is in response to the recent announcement that Cologne Re, Germany, will establish reserves of $275 million to cover potential losses arising in connection with U.S. workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. 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. . This reserve charge, which equates to roughly one-third of the group's capital and surplus position, stems from business underwritten by a London-based agency on behalf of its U.S. subsidiary, Cologne Life Reinsurance Co. The group has indicated, however, that internal funds internal funds Funds that are raised within a firm. For example, income after taxes and noncash expenses, such as depreciation, provide a firm with funds to use in the acquisition of investments. generated by 1998 earnings will be used to mitigate the effect of this charge on surplus. Nevertheless, A.M. Best is concerned with the operational deficiencies that led to this charge, as well as its potential impact on the group's future performance. Accordingly, the ratings will remain under review pending further discussions with management regarding corrective actions A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or and its ongoing business plans. A.M. Best will also be reviewing other companies partaking in similar business arrangements to ascertain their exposure to potential future losses. The "A++" (Superior) rating of the General Re Group, which maintains controlling interest controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail in Cologne Re, remains unaffected by this announcement. A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com. |
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