The downgrades follow PXRE’s announcement that it increased its net loss estimates for hurricanes Katrina, Rita and Wilma by a pretax amount between $281 million and $311 million. As a result of the magnitude and composition of this most recent loss revision and with consideration of the company’s longer-term track record, A.M. Best now has greater concern regarding PXRE’s risk management capability. The most recent range of loss increase accounts for over 60% of reported actual shareholder’s equity on Sept. 30, 2005, which resulted in a deterioration of PXRE’s risk-adjusted capital position.
As a result of the 2005 storm losses, PXRE has taken actions to significantly reduce its maximum net exposure for first event, full limits in its largest zone to a more manageable level. Nonetheless, the ratings have been assigned a negative outlook until these new strategies and risk mitigation procedures have been fully tested. Going forward, A.M. Best will closely monitor the effectiveness of the new strategies and procedures with each catastrophic event.
The following debt rating has been downgraded:
PXRE Capital Trust I—
— to “b+” from “bb” on $100 million 8.85% trust preferred securities, due 2027
The following indicative debt ratings for securities available under shelf registration have been downgraded:
PXRE Group Ltd.—
— to “bb” from “bbb-” on senior unsecured
— to “bb-” from “bb+” on subordinated
— to “b+” from “bb” on preferred stock
PXRE Capital Trust IV—
— to “b+” from “bb” on trust preferred securities