MOODY'S RAISES INSURANCE FINANCIAL STRENGTH RATING OF AMERICAN RE-INSURANCE COMPANY TO A1; ALSO RAISES SUBORDINATED DEBT RATING OF AMERICAN RE CORP. TO Baa1
New York, 08-11-95 -- Moody's Investors Service upgraded the insurance financial strength rating on American Re-Insurance Company to A1 from A2, as well as its rating on the senior subordinated debt of the parent company, American Re Corporation to Baa1 from Baa2. These upgrades reflect continuing strong operations in the reinsurance company, as well as lower financial leverage at the parent, says Moody's. Although American Re Corporation's leverage is significant for a reinsurance enterprise, it has been steadily reduced since the holding company was formed in 1992. Debt levels, although still material, are manageable given the company's operating performance and healthy cash flow.
American Re-Insurance Company is the third-largest property & casualty reinsurer in the United States, and one of the few that sell directly, rather than through brokers. According to Moody's, American Re-Insurance Company benefits from a flexible organizational structure that emphasizes technical underwriting and the longevity of its client relationships. The company's solid and consistent underwriting performance as well as its large size have enabled it to compete effectively in a reinsurance market that continues to favor both size and quality. However, Moody's also remarked that the company operates in an increasingly competitive and global reinsurance marketplace, which creates strategic challenges for the entire industry.
Moody's noted that while American Re Corporation has succeeded in steadily reducing its debt load, the company's financial leverage remains high, with debt comprising just under 40% of total capital and with significant double leverage. Also, American Re-Insurance, like other reinsurers, faces potentially large environmental and toxic substance liabilities. Moody's, notes, however, that these exposures are mitigated by American Re-Insurance Company's broad adverse loss protection, and by the company's active management of individual accounts.
American Re-Insurance Company and American Re Corporation are based in Princeton, New Jersey. American Re-Insurance Company reported net premiums written of $819 million and statutory surplus of $1.1 billion through the first six months of 1995. American Re Corporation reported GAAP shareholders' equity of $953 million as of June 30, 1995.
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