S&P’s Lowers American Re-Insurance Rating

March 28, 2003

Standard & Poor’s has lowered its counterparty credit and financial strength ratings on American Re-Insurance Co. and American Alternative Insurance Corp. (collectively referred to as American Re) to ‘A+’ from ‘AA-‘ because of the recent lowering of the counterparty and financial strength ratings on Munich Reinsurance Co., American Re’s ultimate parent, to ‘AA-‘ from ‘AA+’. Standard & Poor’s group methodology criteria categorizes American Re as a strategically important subsidiary of Munich Re and, as a result, caps the ratings on American Re at one notch below those on the parent.

Standard & Poor’s also lowered its counterparty credit and senior debt ratings on American Re Corp., a holding company that is American Re’s immediate parent, to ‘BBB+’ from ‘A-‘.

The outlook on all of these companies is negative.

The negative outlook reflects uncertainty related to American Re’s ability to turn around its operating performance and fully implement its new strategic plan following four consecutive years of operating losses through 2002. Standard & Poor’s also believes future years’ results could still be modestly affected by further reserve strengthening for claims from past years.

In addition, Standard & Poor’s notes that American Re’s NAIC risk-based capital was below expectations at 129 percent for year-end 2002. However, Standard & Poor’s expects the risk-based capital ratio to improve substantially over the near term, reflecting expected improved operating performance at American Re in 2003 and 2004.

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