A.M. Best Co. has downgraded the financial strength rating to B++ (Very Good) from A- (Excellent) for Annuity and Life Re (Holdings), Ltd.'s operating companies Annuity and Life Reassurance, Ltd. (Bermuda) and Annuity & Life Reassurance America, Inc.

At the same time, A.M. Best downgraded the indicative senior debt rating to “bbb-” from “bbb” under ANR's $200 million shelf registration.

All ratings remain under review with developing implications.

These rating actions follow a July 29, 2002, decision to lower the financial strength ratings of ANR's subsidiaries to A- (Excellent) from A (Excellent) and to maintain the rating under review with negative implications.

In that press release, A.M. Best indicated further rating reductions were possible because of uncertainties in risk-adjusted capitalisation and operating fundamentals.

Also, A.M. Best said the rating actions follow ANR's September 12, 2002, public announcement that it is evaluating capital raising alternatives and has appointed a transition committee of two members from its board of directors to oversee the management of the company's operations, following the retirement of its CEO.

The ratings reflect A.M. Best's concerns with the resolution of the SEC's review of ANR's financial statements, the unsatisfactory operating performance due to the Transamerica Re annuity reinsurance contract and the near-term uncertainties surrounding ANR's effort to raise additional capital and to identify a successor to its recently retired CEO.

A.M. Best also said they had discussed with ANR's management and transition committee each of these areas and their specific and appropriate plans for resolution.

These initiatives, along with resolution of the pending arbitration cases, are expected to strengthen risk-adjusted capitalisation and restructure the company's collateral programmes to support new business activities including the $89 million outstanding on an unsecured credit facility with Citibank N.A.

A.M. Best said they would continue to closely monitor ANR's progress on these initiatives including its revised business plan and the consequences to its financial strength.