A.M. Best Co. announced that it has downgraded the financial strength rating to “B+” (Very Good) from “B++” (Very Good) and the issuer credit ratings (ICR) to “bbb-” from “bbb” for the reinsurance subsidiaries of the Bermuda-based PXRE Group Ltd. The rating actions apply to PXRE Reinsurance Ltd. (Bermuda) and PXRE Reinsurance Company (Hartford, CT). Best also downgraded PXRE’s ICR to “bb-” from “bb” and all its existing and indicative debt ratings, and has placed all of the ratings “under review with negative implications.”
Best noted that the present actions follow its “previous downgrading of PXRE’s ratings on February 16, 2006 after the company announced that it had materially increased its net loss estimates for hurricanes Katrina, Rita and Wilma.
“The company has since announced that in addition to those losses, and the subsequent rating agency downgrades, it has also recorded a material valuation allowance against its income tax recoverables due to the uncertainty that they will be ultimately realized. PXRE has also announced that it has received notices from two of its retrocessionaires that they will commute their coverages with PXRE due to rating downgrades and other changes to the company. This has resulted in pre-tax losses from the hurricanes being revised slightly upward from the high end of previous estimates.”
Best confirmed that all of the ratings would remain under review with negative implications as it “continues to analyze the impact on PXRE of the additional capital loss to both the group and to the individual operating subsidiaries.” Best also said it “will continue to actively monitor the impact of rating agency triggers on PXRE’s ability to continue to do business as well as any strategic alternatives that may be developed.”
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