CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - FEBRUARY 13, 2002 12:00 AM (EST)
A.M. Best Co. has placed the financial strength ratings of A (Excellent) for the insurance operating subsidiaries of Overseas Partners Ltd. (OPL), Bermuda, under review with negative implications. The ratings apply to Overseas Partners US Reinsurance Company (OPUS), Wilmington, Delaware, Overseas Partners Re Limited (OP Re), Overseas Partners Cat Limited (OPCat) and Overseas Partners Assurance Ltd. (OPAL), all of Bermuda.
This action is the result of the recent announcement by OPL's board of directors that it will begin an orderly runoff of most of its operations. Specifically, OP Re and OPAL will be placed into runoff while a buyer is sought for OPUS. Additionally, the company has reached an agreement with Renaissance Re, who currently underwrites and assumes 50% of OPCat business, to now assume 100% of this business. OPL's board of directors has taken these actions in the wake of strides that had been made over the last two years to improve the company's operations. These strides had included the installation of a new management team and their initiatives to significantly strengthen loss reserves, exit from unprofitable classes of business and focus of operations on a limited number of specialty lines.
Despite these efforts and A.M. Best's expectation of significant rate hardening in the reinsurance marketplace, OPL's board of directors is averse to deploying its capital to support growth at the expense of the short-term liquidity requirements of the shareholders. Currently, shareholders are dependent on stock buyback programs and shareholder dividends to realize value from their investments. Management had ceased the stock buyback program effective August 2001, and recently announced its intent to eliminate shareholder dividend payments to preserve its capital base.
The ratings will remain under review pending A.M. Best's completion of its review of the strategic and capital restructuring of the group to separate runoff operations from ongoing business segments, the assumption of OPCat's business by Renaissance Re and the full impact - including legal and regulatory - on each entity's policyholder base. A.M. Best views the overall capitalization of the group - with $1.3 billion shareholders equity - as adequate to support its obligations, reflecting the fact that two independent actuarial opinions have confirmed the adequacy of its loss reserves. Nonetheless, upon completion of the review, it is likely that A.M. Best will lower the ratings of both the active and inactive operations, reflecting the significant change in their operational structure and the potential risks associated with these changes.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.