A.M. Best Downgrades Am Re Over Reserve Charge

NU Online News Service, Feb. 17, 3:54 p.m.EST?A.M. Best Co. said it has downgraded various ratingsof American Re Corporation Group over concerns about the company'sannouncement of a $180 million reserve strengthening [@@]

The downgrades by the Oldwick, N.J.-based rating agency impactfinancial strength ratings of American Re's major business units,which have been cut to "A" from "A-plus."

The units involved include American Re-Insurance Company,American Alternative Insurance Corporation, and The PrincetonExcess & Surplus Lines Insurance Company. American Re is partof Munich, Germany-headquartered Munich Re.

Best said its decision has been precipitated by American Re'sannouncement that it took additional reserve strengthening of $180million in the 2004 fourth quarter related to its asbestosexposure?culminating in an overall 2004 adverse reserve developmentof $482.3 million pre-tax.

A.M. Best observed that the quality of American Re'srisk-adjusted capitalization and underwriting performance?as wellas its earnings trend over the past five years?has been hurt bysignificant and repeated adverse development charges covering the1997-2001 accident years, asbestos charges and catastrophe-relatedexposure.

The ratings agency acknowledged that American Re hashistorically enjoyed explicit and implicit support provided by itsparent Munich Re in the form of capital infusions, stop loss coversand retrocessional arrangements.

Despite this help from its parent, Best said, American Re'srisk-adjusted capitalization and earnings performance remain belowBest's expectations.

Additionally, Best said it has also cut the issuer credit ratingof American Re-Insurance Company to "a" from "double-a-minus" andthe senior debt rating of American Re Corp. to "triple-b" from"a-minus". The outlook for all ratings has been revised to "stable"from "negative."