Posted on 05 Feb 2009
OLDWICK, N.J. February 03 (BestWire) — A.M. Best Co. has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and the issuer credit rating (ICR) to “bbb” from “a-” of New Castle Reinsurance Company Ltd. (New Castle Re) (Bermuda). A.M. Best has also downgraded the ICR to “bb-” from “bbb-”of New Castle Reinsurance Holdings Ltd. (Bermuda). All ratings have been removed from under review with negative implications and assigned a negative outlook. Concurrently, A.M. Best has withdrawn the ratings at the company’s request and assigned an NR-4 to the FSR and an “nr” to the ICRs. These rating actions reflect management’s decision to withdraw from A.M. Best’s interactive rating process.
The rating actions reflect New Castle Re's revised business profile as a run-off entity and its supportive level of risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio (BCAR). On December 16, 2008, New Castle Re announced a renewal rights transaction with a third party whereby the third party acquired the right to renew virtually all of New Castle Re's policies at January 1, 2009. Additionally, New Castle Re's infrastructure including almost all of its employees and its systems were transferred to the third party. On January 16, 2009, New Castle Re formally announced it was in run-off effective immediately, ceasing to write any new and renewal business.
Although the company has indicated its intention to provide for an orderly run off of all existing policyholder obligations, the negative outlook reflects the continued concerns with the status of their primary investors, Citadel Kensington Global Strategies Fund Ltd. and Citadel Wellington LLC (together known as the Funds) and the potential for dividends to be paid out inconsistently with management’s current run-off plan that assumes New Castle Re retains the remaining risk for the full term of the underlying contracts, which may be impacted by these rating actions.. Citadel Limited partnership is the manager of the Funds.
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The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at http://www.ambest.com/ratings/methodology.