S&P Places American Re on CreditWatch; Neg Implications

February 16, 2005

Standard & Poor’s Ratings Services announced today that it placed on CreditWatch with negative implications its ‘A’ counterparty credit and financial strength ratings on U.S.-based American Re-Insurance Co. and its subsidiaries American Alternative Insurance Corp. and
Princeton Excess & Surplus Lines Insurance Co. (collectively, American Re) following the company’s announcement of its fourth quarter 2004 results.

“American Re’s fourth-quarter 2004 results reported further reserve
strengthening of $287 million (on a pretax GAAP basis) related to prior-year business (including $180 million of asbestos liability), contributing to total reserve additions of $482 million (pretax) for full-year 2004,” observed S&P credit analyst Laline Carvalho. “As a result of these charges, American Re’s 2004 operating performance was substantially lower than expected, with the group reporting a 2004 GAAP combined ratio of 122%, compared with Standard & Poor’s initial expectation of a combined ratio of 103%-105%.”

Standard & Poor’s also placed its ‘BBB’ counterparty credit and senior debt ratings on American Re Corp. on CreditWatch with negative implications.

Standard & Poor’s expects to resolve the CreditWatch in the next six to eight weeks, following discussions with American Re’s and Munich Re’s management regarding American Re’s expected operating performance and capital adequacy levels in the next two to three years, cycle management initiatives, loss reserve adequacy, and the type of support arrangements (from the parent to American Re) that may be expected to remain in place over the medium term.

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