A.M. Best Places Shelter Re's Rating Under Review.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 2, 2001 A.M. Best Co. has placed the financial strength rating of A- (Excellent) for Shelter Re, Columbia, Mo., under review with negative implications. This rating action is based on several factors that have combined to weaken Shelter Re's capital position below levels commensurate with A.M. Best's "Excellent" rating status. Losses from the recent World Trade Center attacks coupled with a downturn in the equity markets have played a part in weakening the company's capitalization. Additionally, Shelter Re's high probable maximum loss Probable Maximum Loss (PML) The anticipated value of the largest loss that could result from the destruction and the loss of use of property, given the normal functioning of protective features (firewalls, sprinklers, and a responsive fire department, among others, in the (PML PML - Parallel ML. ["Synchronous Operations as First-Class Values", J.H. Reppy <jhr@research.att.com>, Proc SIGPLAN 88 Conf Prog Lang Design and Impl, June 1988, pp. 250-259]. ) exposure has also increased the company's minimum surplus requirement. Moreover, the under review rating status considers the potential of an upward revision in preliminary loss estimates and the possibility of further deterioration of the equity markets. The "negative implications" of the under review status reflects A.M. Best's concern over the degree to which corrective action 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 needs to be taken by the company; as well as the role Shelter Re's parent, Shelter Mutual Insurance Company, will play in restoring its subsidiary's capital position. Despite this action, Shelter Re has historically exhibited favorable earnings, strong operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. and a practiced 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. approach. These positive rating factors are derived from its experienced management team, global geographic spread of risk and strong relationship with its parent. Shelter Re provides the group with a unique diversification strategy that complements its core personal lines book of business and allows it to operate selectively within the 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. marketplace, free from many of the pressures experienced by stand-alone reinsurance companies. 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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