These actions reflect the continued erosion in ANR's earnings base from its core life insurance and annuity businesses. In addition, the ratings reflect ANR's recent announcement to cease writing new business, the execution risk in its restructuring plans and its lack of financial flexibility. These rating actions follow ANR's February 24, 2003, announcement that it expects to report a significant loss in the fourth quarter and for the full year 2002.
On September 30, 2002, A.M. Best lowered ANR's ratings and placed them under review with developing implications primarily to reflect ANR's weakened operating performance, immediate concerns regarding its ability to meet collateral requirements under bank credit facilities and an SEC review. Since that time, ANR has taken actions to improve the quality of its balance sheet and continues to restructure its collateral funding requirements. While ANR has not satisfied all its year-end 2002 collateral requirements, A.M. Best acknowledges that it continues to attempt to recapture, retrocede or sell additional blocks of life insurance business to eliminate any unmet requirements. ANR is also in the process of restating its financial statements as it seeks to conclude an SEC staff review of the company's prior public filings.
Although the combined impact of these issues has significantly reduced ANR's capitalization in 2002, A.M. Best believes that the company's capital remains adequate to cover its current obligations to existing policyholders even after the anticipated restatement of its financial statements. However, A.M. Best does remain concerned about ANR's ability over the near term to stabilize its overall financial position, particularly its collateral funding requirements. Therefore, A.M. Best will continue to monitor management's efforts to restructure the company and re-establish it as a going concern. If the company experiences any additional deterioration in its financial position, the ratings on ANR could be lowered.
The financial strength ratings have been downgraded to B+ (Very Good) for the following life subsidiaries of Annuity and Life Re (Holdings), Ltd.:
-- Annuity and Life Reassurance, Ltd
-- Annuity & Life Reassurance America Inc
The following indicative senior debt rating has been downgraded:
Annuity and Life Re (Holdings), Ltd.-- -- "b+" on senior debt securities available under the $200 million shelf registration
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.
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