A.M. Best Co. downgraded the financial strength rating to “B (Fair)” from “A-minus (Excellent)” and issuer credit rating to “bb” from “a-minus” of Lehman Re Limited of Hamilton, Bermuda. The outlook for both ratings is negative.
Lehman Re is a wholly owned reinsurance subsidiary of Lehman Brothers Holding Inc. that filed for Chapter 11 bankruptcy protection yesterday. The Oldwick, N.J.-based insurance rating service said the bankruptcy action prompted the rating action.
Best explained that while Lehman Re is not included in the bankruptcy petition, it believes that the pending reorganization of Lehman Brothers could have a significant adverse impact on Lehman Re because the balance sheet of Lehman Brothers would be a source of capital for Lehman Re, if needed.
Best said it is also concerned about the future of ongoing operating ties such as the securities activity between Lehman Re and other Lehman Brothers' affiliates, the administrative and investment management services provided to Lehman Re by other subsidiaries of Lehman Brothers, and the inability of Lehman Brothers to refer potential insurance clients to Lehman Re.
Best said it will continue to evaluate the impact of the Lehman Brothers' bankruptcy reorganization on Lehman Re and the rating and/or outlook could change.
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