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A.M. Best Comments on the Ratings of New Castle Reinsurance Company Ltd.

OLDWICK, N.J. -- Fourth graph, first sentence should read: The decision to place an affiliated reinsurer into run off is not expected to have a material impact on New Castle Re's premium volume (sted The decision to place an affiliated reinsurer into run off is expected to have a material impact on New Castle Re's premium volume).

The corrected release reads:


A.M. Best Co. has commented that the ratings and outlook of New Castle Reinsurance Company Ltd. (New Castle Re) and New Castle Reinsurance Holdings Ltd. (both of Bermuda) remain unchanged despite the challenges faced by their primary investors, Citadel Kensington Global Strategies Fund Ltd. and Citadel Wellington LLC (together known as the Funds). Citadel Limited Partnership is the manager of the Funds.

In recent months, the Funds reported material losses (which primarily have been driven by the recent dislocation in the credit markets) and decided to shut down an affiliated company writing collateralized reinsurance. However, these developments, in A.M. Best's viewpoint, have not merited a change in the rating and/or outlook of New Castle Re at this time.

New Castle Reinsurance Holdings Ltd. is wholly owned by the Funds, which have reported their largest monthly losses in September 2008 and October 2008 due to the dislocation in the credit market and the volatility of the equity markets. Although the Funds have seen a dramatic decline in returns during 2008, investor redemptions to date have been in line with prior periods. Furthermore, the Funds have redemption terms that inhibit investors from withdrawing excessive amounts of assets beyond what is in the long-term best interest of the Funds including fees and an autonomous power to control redemption and/or distribution levels. A.M. Best will be closely monitoring the performance and redemption levels over the near term as the Funds are challenged by difficult economic conditions and systemic problems facing the hedge fund industry, which could lead to an increased level of redemptions.

The decision to place an affiliated reinsurer into run off is not expected to have a material impact on New Castle Re's premium volume. Any loss of premium volume is expected to be more than offset in part by the favorable rates in New Castle Re's core lines of business, as well as, the increased opportunities available due to the large amount of capital lost in the property/casualty industry during 2008. Also, New Castle Re has enjoyed a low expense ratio due to its association with the affiliated reinsurer. A.M. Best expects to see an increase in expenses over time, although the increase is projected to have only a marginal affect on profitability. A.M. Best will be closely monitoring New Castle Re's business volume and expenses to ensure the impact from the decision to place the affiliated company into run off does not materially affect the trading status and profitability of New Castle Re.

Although New Castle Re did incur a significant amount of losses as a result of hurricanes Gustav and Ike, overall performance for year-to-date 2008 is positive due to both profitable underwriting and investment activities. Given the investment portfolio of New Castle Re consists solely of cash and cash equivalents, the company did not suffer from investment losses, which have plagued most of its peers. Therefore, New Castle Re is well positioned to take advantage of current market opportunities as mentioned above.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit
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Publication:Business Wire
Date:Nov 13, 2008
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