Best Lowers Lehman Re Ratings

September 12, 2008

A.M. Best Co. has downgraded the financial strength rating (FSR) to ‘A-‘ (Excellent) from ‘A’ (Excellent) and the issuer credit rating (ICR) to “a-” from “a” of Bermuda-based reinsurer Lehman Re Limited. In addition Best revised the outlook for all of the ratings to negative from stable. Lehman Re is a wholly owned reinsurance subsidiary of the investment bank Lehman Brothers Holding Inc.

Best explained: “While the financial condition of Lehman Re is currently unaffected by challenges at the parent company, A.M. Best’s growing concern regarding the potential impact on Lehman Re due to perceived financial difficulties at Lehman Brothers has prompted these rating actions.”

As Best indicated, “Lehman Brothers has experienced a significant decline in its market capitalization,” As a result Best said it ” believes that this rapid deterioration in investor confidence generates uncertainty as to the ability of the parent to raise capital to support Lehman Re, if needed.”

Best acknowledged that “Lehman Re’s current stand-alone capital position adequately supports its ratings;” however, Best added, “the negative perception surrounding the parent company may potentially impact Lehman Re’s ability to attract and retain business.”

Best will continue to actively follow events affecting Lehman, and indicated that the situation could “change in the short term.”

Source: A.M. Best –

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