PXRE Outlook Still Uncertain

Senior management disruptions and shareholder suits are among the factors that led Fitch Ratings to keep Bermuda-based PXRE Group Ltd. Rating Watch Negative, where it has stayed since mid-February.

Fitch analysts have cited the following factors:

o Continued uncertainty related to PXRE's future viability and business direction as the company continues to explore strategic alternatives. Fitch believes such actions often signal a distressed situation and potential runoff.

o Additional disruptions in senior management. Fitch notes that the company's chief operating officer has given notice of his resignation effective July 17, 2006.

o Shareholder lawsuits that Fitch anticipated have now become reality, with their ultimate financial impact unknown.

o Concerns regarding the company's ability to continue to operate profitably given its reduced premium base and the potential for inadequately set reserves. Roughly 65 percent of PXRE's in-force business as of Jan. 1, 2006 has either been nonrenewed or cancelled.

o Fitch's belief that PXRE has limited financial flexibility going forward.

On the positive side, however, analysts noted that through the first quarter of 2006, PXRE did not experience adverse loss reserve development related to its 2005 hurricane losses. In addition, its catastrophe risk has been reduced since a large amount of its premium base has been nonrenewed or cancelled. The agency expects this will continue to be the trend.

Fitch originally placed the ratings on Rating Watch Negative on Feb. 17, following PXRE's announcement that the company had increased its pretax net loss estimates for Hurricanes Katrina, Rita and Wilma by $281-to-$311 million and decided to explore strategic alternatives.

Fitch concurrently downgraded its Insurer Financial Strength (IFS) rating on PXRE's lead operating subsidiaries, PXRE Reinsurance Ltd. and PXRE Reinsurance Company, to “double-B-plus” from “triple-B-plus.”