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ENHANCE REINSURANCE COMPANY CLAIMS-PAYING ABILITY RATED 'Aaa' BY MOODY'S

 NEW YORK, Feb. 17 /PRNewswire/ -- Effective today, Moody's Investors Service announced that it has assigned a "Aaa" claims-paying rating to Enhance Reinsurance Company, a New York domiciled financial guaranty reinsurance company that began business in 1986. Enhance is an integral part of the financial guarantee industry and offers support to the business of the primary insurers.
 According to William F. deSante, vice president and managing director of Moody's Structured Finance Ratings Group, "Enhance is adequately capitalized to withstand significant claims. The company was subjected to numerous stress test simulations and capital was, at all times, sufficient to pay claims. Enhance benefits from a portfolio predominantly composed of low-risk, municipal bond sectors. Approximately 70 percent of Enhance's portfolio is of A' or better credit quality. The insured portfolio is also well-diversified geographically and single large-risk exposure has been managed through a series of facultative retrocessions with other reinsurers."
 Statutory capital (policyholders surplus plus contingency reserve has grown from $89 million at year end 1986 to $198.5 million as of third quarter 1992. The significant growth in capital is principally due to the retention of earnings. Additionally, a public stock offering by Enhance Financial Services Group, Inc. (Enhance Financial), the parent company, in February of 1992 resulted in a $7.5 million capital contribution to Enhance. Enhance has recorded a six-year trend of improving profitability. That trend has continued into 1992, with net income recorded at $22.1 million for the first three quarters of 1992, compared to $23.6 million for the full year ended 1991. A net underwriting gain of $5.3 million was posted for the first three quarters of 1992 as compared to $5.5 million for the full year 1991. Since 1989 Enhance has achieved an 11.1 percent compound annual growth rate on its investment portfolio.
 Enhance Financial is planning to issue approximately $75 million in debt during the first quarter of 1993. The net proceeds of the debt will be contributed to Enhance. Although the necessary dividending of income to service debt payments may limit internal capital growth, the capital contribution and the accompanying investment earnings will enable Enhance to continue growing its exposure levels without further leveraging its capital base. Additionally, Enhance recently entered into an excess-of-loss reinsurance agreement with Hanover Ruckversicherungs Aktiengesellschaft, a German reinsurance company. The reinsurance arrangement provides Enhance with $25 million of catastrophic loss protection on its entire portfolio.
 The favorable risk characteristics of the insured portfolio are reflective of management's conservative underwriting guidelines. Before reinsuring a particular insurer's portfolio on a treaty basis, Enhance performs a credit review of the insurer and its underwriting standards. Additionally, annual reviews are conducted of the insurer's operations, including an analysis of any changes of events that have occurred over the past year. For transactions assumed on a facultative basis Enhance analysts review each credit.
 In its analysis of Enhance's claims-paying ability, which will be published shortly, Moody's states, "Enhance assumes business from the primary insurers on both a facultative and treaty basis, although treaty business constitutes approximately 70 percent of its assumed exposure. Enhance's strategy has been to follow in the success of the primary insurers. There is a risk that the primary insurers may want to retain more business in the future, especially if the insured municipal market growth slows. However, it is expected that the primary insurers will continue to cede exposure on a treaty basis to Aaa'-rated reinsurers like Enhance."
 Although Enhance has managed its single large-risk exposure through the use of facultative retrocessions, the company has adopted a strategy with respect to its retrocessions similar to that employed when it assumes business. Enhance prefers to cede business on a treaty basis. Since most of the multiline reinsurers prefer a secondary loss position for a shorter term, Enhance retains most of its exposure.
 -0- 2/17/93
 /CONTACT: William F. deSante, vice president and managing director, 212-553-0353, Laura Levenstein, vice president, 212-553-0319, Nicholas Ferrari, assistant vice president, 212-553-3628, or Allen Klee, senior analyst, 212-553-4117, all of Moody's/
 (EFS)


CO: Enhance Reinsurance Company ST: New York IN: FIN SU: RTG

CK-LR -- NY067 -- 7345 02/17/93 12:39 EST
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Date:Feb 17, 1993
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