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A.M. BEST LOWERS PRUDENTIAL PROPERTY AND CASUALTY GROUP'S RATING FROM 'A' (EXCELLENT) TO 'A-' (EXCELLENT)

 A.M. BEST LOWERS PRUDENTIAL PROPERTY AND CASUALTY GROUP'S RATING
 FROM 'A' (EXCELLENT) TO 'A-' (EXCELLENT)
 OLDWICK, N.J., Nov. 4 /PRNewswire/ -- Effective immediately, A.M. Best Company has lowered Prudential Property and Casualty (PRUPAC) Group's Best's Rating from "A" (Excellent) to "A-" (Excellent) and removed the company from Best's Rating Watch List. This rating action reflects the magnitude of the company's Hurricane Andrew losses, as well as its continued vulnerability to significant catastrophe exposures, particularly in Florida, which are not adequately protected by its current reinsurance program.
 Despite the vulnerability to catastrophe losses, PRUPAC maintains strong and committed parental support from Prudential Insurance Company of America (part of the Prudential of America Group). The rating action applies to five members of the PRUPAC group, led by Prudential Property and Casualty Insurance Company.
 PRUPAC does not expect any further increases to its previously announced Hurricane Andrew gross loss estimate of $1.3 billion. This loss resulted in a statutory after-tax charge of $900 million and was fully funded by Prudential Insurance Company of America as of Sept. 30, 1992. PRUPAC's surplus was $580 million at June 30, 1992.
 PRUPAC is in the process of reevaluating its risk management strategy in light of Hurricane Andrew losses. The company is considering a number of corrective actions to minimize its catastrophe exposures including premium rate increases, business reductions and increasing reinsurance protection in catastrophe prone areas, as well as exploring wind-loss deductible policy features.
 The catastrophe model, which is widely used by other companies in the industry, significantly underestimated PRUPAC's losses in Florida. The model accurately predicted the company's number of claims, but grossly underestimated claim severity. As part of its risk management reevaluation, the company is working with other insurance groups to enhance the accuracy of the catastrophe model.
 On Sept. 24, 1992, A.M. Best had placed PRUPAC's "A" rating on its Rating Watch List following the company's sharply raised estimate of losses from Hurricane Andrew.
 The Prudential Insurance Company of America's "A++" (Superior) Best's Rating has been affirmed. The affirmation reflects the modest effect which the capital infusion to PRUPAC will have on its overall financial position. Although Prudential's capitalization will be temporarily impacted through the transfer of assets associated with the infusion, its strong statutory operating earnings, estimated to approach $1.0 billion in 1992, combined with the profitable performance of its other subsidiaries should enable the company to maintain its surplus and conditional reserves at, or near, 1991's year-end level of $9.7 billion. In addition, the company's capitalization is further insulated by additional economic values embedded in its general account balance sheet, including the improving outlook for its retail brokerage, residential real estate, and managed care accident and health segments.
 The Prudential Insurance Company of America's "A++" (Superior) Best's Rating was placed under review on Sept. 24, 1992 following the announcement of PRUPAC's revised hurricane losses.
 -0- 11/4/92
 /CONTACT: Christina Stein of A.M. Best Company, 908-439-2200 ext. 5642/ CO: Prudential Property and Casualty ST: New Jersey IN: INS SU: RTG


TS -- NY065 -- 2619 11/04/92 15:23 EST
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Publication:PR Newswire
Date:Nov 4, 1992
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