Rating agency AM Best has assigned an indicative rating of "bbb+" to the senior debt of Bermuda-based Annuity & Life Re Holdings.

Annuity Life & Re (ANR) recently filed a $200 million shelf registration.

AM Best said further that the debt rating and the existing financial strength ratings of A (Excellent) on ANR's two operating companies, Annuity and Life Reassurance Ltd., Bermuda, and Annuity and Life Reassurance America, Inc., United States, are under review with negative implications.

In February, AM Best placed ANR's two operating companies' financial strength ratings under review with negative implications following ANR's announced operating loss in its largest annuity contract. The current shelf registration provides for the issuance of up to $200 million of senior notes that will be used for general corporate purposes but primarily to support ANR's current business plan.

AM Best said: "While ANR currently has no outstanding debt, we expect total borrowings - as a percentage of total capital - to remain near 25 percent in the intermediate term, supported by fixed charge coverage in the mid-single digit range.

"Although a draw down on its shelf filing would improve ANR's capitalisation, the ratings reflect AM Best's concern about recent volatility in earnings and also the impact in operating performance from the annuity contract."

AM Best said it would continue to closely monitor ANR's operating fundamentals and its ability to meet its obligations.

ANR is a life reinsurance holding company, with as of December 31, 2001, reported assets of $2.3 billion, life insurance in-force of $117 billion and stockholder's equity of $405 million.