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Insurance industry

A.M. Best Comments on American Re-Insurance Company's Financial Strength Rating

Strategic Insights

— 1 min read

American Re-Insurance Company, a significant player in the U.S. professional reinsurance market, has reported robust earnings in 2003 and maintained its superior financial strength rating of A+ (Superior) following a pre-tax charge of $368 million for additional reserve strengthening. The rating agency, A.M. Best, believes that the company's strong capitalization and ongoing commitment from its parent company, Munich Re, will enable it to further strengthen and maintain its capital position.

Key Takeaways:

  • The financial strength rating of American Re-Insurance Company remains unaffected by the pre-tax charge of $368 million for additional reserve strengthening, which is in line with the company's previously contemplated reserve deficiency.
  • The company's stand-alone capitalization remains supportive of its superior financial strength rating, with a statutory surplus of $3.34 billion at the end of 2003.
  • American Re has benefited from improved market conditions, reflected by improved earnings, and current accident year trends are very favorable, in line with the U.S. reinsurance sector.
  • The company executed a significant novation, which, together with other actions, resulted in a net decline in carried reserves.
  • Munich Re's ongoing commitment will enable American Re to further strengthen and maintain its capital position at a level commensurate with its current rating.
  • The financial strength rating of American Re-Insurance Company's subsidiaries, including American Alternative Insurance Corp. and Princeton Excess & Surplus Lines Insurance Co., remains unaffected.
  • The senior debt rating of American Re Corp.'s $500 million 7.45% senior unsecured notes, due Dec. 15, 2026, remains unaffected at a-.

Statistics:

  • Pre-tax charge of $368 million for additional reserve strengthening
  • Statutory surplus: $3.34 billion at the end of 2003; $1.1 billion increase due to capital contribution and unrealized capital gains
  • Net decline in carried reserves due to significant novation
  • Improved earnings in 2003
  • Current accident year trends are very favorable, in line with the U.S. reinsurance sector

Sources:

  • A.M. Best Co. (via COMTEX) - March 8, 2004
  • A.M. Best Company, Inc. (http://www3.ambest.com/reinsurance/)
  • COMTEX (http://www.comtexnews.com)

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