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

A.M. Best observed that the quality of American Re's risk-adjusted capitalization and underwriting performance?as well as its earnings trend over the past five years?has been hurt by significant and repeated adverse development charges covering the 1997-2001 accident years, asbestos charges and catastrophe-related exposure.

The ratings agency acknowledged that American Re has historically enjoyed explicit and implicit support provided by its parent Munich Re in the form of capital infusions, stop loss covers and retrocessional arrangements.

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

Additionally, Best said it has also cut the issuer credit rating of American Re-Insurance Company to "a" from "double-a-minus" and the 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."