A.M. Best Downgrades Ratings of Trenwick Group

A.M. Best Co. has downgraded the financial strength ratings of Trenwick Group Ltd.’s various operating subsidiaries.

Concurrent with these actions, the debt ratings relating to securities issued by various holding companies within the group have also been downgraded. (See below for a complete listing of all ratings affected.) All ratings remain under review with negative implications.

The rating actions reflect A.M. Best’s ongoing concerns about the increased operating leverage in Trenwick’s core operating subsidiaries, along with the limited financial flexibility maintained by the group as a whole. Although A.M. Best recognizes the procedures taken by management to reduce operating and financial leverage, A.M. Best believes that Trenwick remains constrained in its ability to generate a level of capital from ongoing businesses that are consistent with its prior ratings. A.M. Best notes obligations associated with the scheduled maturity of a $75 million senior note (due in April 2003) place further pressure on the organization’s capital resources and believes that its negotiating position with its various creditors in becoming increasingly tenuous.

In August 2002, A.M. Best placed the group’s ratings under review with negative implications pending management’s successful completion of a capital restructuring. A.M. Best will continue to monitor the organization’s progress on these initiatives as well as its plans for each of its operating subsidiaries.

Nevertheless, further downgrades are possible should Trenwick’s ongoing financial restructuring initiatives fall behind and fail to adequately resolve A.M. Best’s concerns with regards to its current operating and financial leverage position. Accordingly, the ratings remain under review with negative implications.

Prior to these rating actions, A.M. Best had assigned group ratings to all of Trenwick’s operating subsidiaries. As part of this review, A.M. Best has removed this rating status and is assigning financial strength ratings to these entities based upon their stand-alone financial position.

The financial strength ratings of A- (Excellent) have been downgraded to B+ (Very Good) for the following subsidiaries of the Trenwick Group:

*Trenwick America Reinsurance Corporation
*Trenwick International Limited
*Insurance Corporation of New York
*Dakota Specialty Insurance Company

The financial strength rating of A- (Excellent) has been downgraded to B (Fair) for the following subsidiary of the Trenwick Group:

Chartwell Insurance Company
The financial strength rating of B++ (Very Good) has been lowered to B+ (Very Good) for the following subsidiary of the Trenwick Group:

LaSalle Re Limited
The following debt ratings have been downgraded to “bb-” from “bbb-“:

Trenwick America Corporation-

on $75 million 6.7% senior notes, due April 2003 (guaranteed by Trenwick Group, Ltd.)
on senior unsecured debt under shelf registration
The following debt ratings have been downgraded to “b-” from “bb”:

Trenwick Capital Trust I-

on $110 million 8.82% subordinated capital securities, due 2037
LaSalle Re Holdings-

on $75 million Series A preferred shares The following indicative debt ratings have been downgraded:
Trenwick Group Ltd.-

Securities available under shelf registration:

*to “bb-” from “bbb-” on senior unsecured debt
*to “b+” from “bb+” on subordinated debt
*to “b-” from “bb” on preferred stock

Trenwick America Capital Trust I, II and III-

to “b-” from “bb” on preferred securities.

Topics AM Best