Centre Solutions Limited Downgraded

NU Online News Service, Nov. 25, 3:35 p.m. EST--A.M. Best Co. has downgraded the financial strength ratings of Centre Solutions (Bermuda) Limited (Centre) (Hamilton, Bermuda) and its operating subsidiaries to "A-minus" (Excellent) from "A" (Excellent). All ratings remain under review with implications changed to developing from negative.[@@]

The downgrade reflects Centre's diminished capital profile and more recent lackluster operating performance due to continued adverse loss reserve development in its discontinued lines of business. The company's capital has declined significantly since Dec. 31, 2002, following the announcement that credit enhancement and life/health lines of business were being placed into runoff. Centre's new focus will be on business opportunities exclusively in the area of structured risk property/casualty insurance and reinsurance, according to A.M. Best

Following extensive internal and external reserve reviews, Centre has recorded reserve strengthening of approximately $485 million through Sept. 30, 2003, in addition to impaired asset write-offs and restructuring charges. Capital has declined from $914 million at Dec. 31, 2002, to approximately $620 million at Sept. 30, 2003.

The under review status with developing implications reflects uncertainty with regard to the level and nature of capital support to be provided to Centre from its parent company, Zurich Financial Services Group in Zurich, Switzerland. A.M. Best said, in its opinion, additional capital support will be necessary not only to enhance Centre's market position as a provider of structured risk insurance and reinsurance solutions but also to mitigate the continued potential for additional adverse reserve development in discontinued classes of business.

Resolution of the under review status is predicated on the completion of further due diligence on Centre's current loss reserve position and finalization of the capital support provided to Centre from ZFS, A.M. Best said.