Best Downgrades Transatlantic Companies to ‘A+’; Revises Outlook to Stable

October 28, 2004

A.M. Best Co. announced that it has downgraded the financial strength rating to “A+” (Superior) from “A++” (Superior) of Transatlantic Reinsurance Company and Putnam Reinsurance Company, both New York-based companies that operate under a pooling agreement, as well as the European subsidiary, Trans Re Zurich. All the companies are reinsurance subsidiaries of Transatlantic Holdings, Inc.

Best also said it has assigned the group members an issuer credit rating of “aa” and Transatlantic Holdings an issuer credit rating of “a”. The outlook for all ratings has been revised to stable from negative.

“This rating downgrade reflects the deterioration in the group’s risk-adjusted capital, which is below A.M. Best expectations of what is necessary to support the A++ (Superior) rating, “said the announcement. Best has taken a more pessimistic view on Transatlantic than S&P, which announced yesterday that it had affirmed its “AA” counterparty credit and financial strength ratings on Transatlantic Re and its subsidiaries (See IJ Website Oct.27).

Best noted that it had assigned the ratings a negative outlook last January 2004, “indicating that risk-adjusted capital had deteriorated in the prior two years due to the group’s premium growth, much of which was driven by rate increases and significant reserve strengthening actions taken.” It also noted that “while Transatlantic’s stockholders’ equity grew by $346 million in 2003 and since January 2004 has grown another $100 million despite significant catastrophe losses, the group’s risk-adjusted capital has declined further as a result of continued growth in premium volume, still rate driven, as well as incurring approximately $100 million of such catastrophe losses in the third quarter of 2004.”

The group’s new rating “reflects its historically strong operating performance, which consistently outperforms many of its reinsurance peers, and its leadership position as a global broker-market reinsurer,” the bulletin continued. “As of September 2004, the group maintained $2.5 billion of stockholders’ equity and does not carry any debt obligations. The group’s risk-adjusted capitalization is at the low end for ‘Superior’ rated companies; however, the rating and stable outlook continue to reflect Transatlantic’s long-standing strategic relationship with its majority owner, American International Group, Inc. (AIG), which beneficially owns 60 percent of Transatlantic. AIG’s Chairman, Maurice Greenberg, also serves as chairman of Transatlantic.”

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