Storm-battered PXRE Reinsurance Company received more ratings bad news with Moody's Investors Service announcing a downgrade of the company's financial strength and debt rating.
The New York-based rating service lowered PXRE's financial strength rating from "Baa2″ to "Baa3″ and the debt rating of PXRE Capital Trust I to "B3″ from "B1." The ratings remain on review for possible further downgrade, Moody's said.
This action follows the company's recent revised increase in its 2005 storm loss estimates and notices of cancellation from two of its retrocessionaires.
This was Moody's second downgrade in February of PXRE. The announcement is one in a string of downgrades for the carrier announced this month by Standard & Poor's, Fitch Rating and A.M. Best.
Some insurers are beginning to voice concern over the news coming out on PXRE. Tower Group Inc., based in New York, said its reinsurance recoverables from the reinsurer amounted to $33.2 million. While it has yet to collect on the policy, in a statement today on its fourth-quarter earnings report, the insurer said it believes the amount is fully collectible.
Tower reported net income for the 2005 fourth quarter of $6.6 million compared to $3 million in 2004. For the year, net income grew to $21 million for 2005, up from $9 million in 2004.
PXRE reported last week a net loss before convertible preferred share dividends for the fourth quarter of $446.5 million, compared with net income of $33 million for the same period in 2004. Revenues in the quarter increased 76 percent, or $68 million, from $89 million to $157 million.
For the year, the net loss was $698 million, compared with net income of $23 million in 2004. Revenues on the year rose 25 percent, or $84 million, from $336 million to $420 million.
The total net loss for PXRE from the three hurricanes (Katrina, Rita and Wilma), after reinsurance recoveries, was $807 million.
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