Centre Solutions Ltd., has been hit by another blow, after ratings agency A.M. Best Co. cited a “lacklustre” performance and a “diminished capital profile” as reasons for downgrading the company.

The company, which had its staff slashed and many of its operations put into run-off a year ago, had its financial strength ratings dropped to an A minus (Excellent) from A (Excellent).

The US ratings agency, whose recommendations are used as a guide to the value of a company, said all ratings remain under review with implications changed to developing from negative.

“The downgrade reflects Centre's diminished capital profile and more recent lacklustre operating performance due to continued adverse loss reserve development in its discontinued lines of business,” said A.M. Best. “The company's capital has declined significantly since December 31, 2002, following the announcement that credit enhancement and life/health lines of business were being placed into run-off. Centre's new focus will be on business opportunities exclusively in the area of structured risk property/casualty insurance and reinsurance.”

An undisclosed number of staff at Centre Solutions lost their jobs after its parent company Zurich said it was going to focus on its core business, and Centre Solutions lost its credit enhancement business.

The move to close down the division was attributed to it no longer being a core product contributing to the company's profitability. The division was be put into run-off - or effectively cease to write new business while continuing to support already written contracts.

A.M. Best said that following extensive internal and external reserve reviews, Centre recorded reserve strengthening of about $485 million through September 30, 2003, in addition to impaired asset write-offs and restructuring charges adding that capital has declined from $914 million at December 31, 2002, to about $620 million at September 30, 2003.

“The under review status with developing implications reflects uncertainty with regard to the level and nature of capital support to be provided to Centre from its parent company, Zurich Financial Services Group,” said the report. “In A.M. Best's opinion, additional capital support will be necessary not only to enhance Centre's market position as a provider of structured risk insurance and reinsurance solutions but also to mitigate the continued potential for additional adverse reserve development in discontinued classes of business.

“Resolution of the under review status is predicated on the completion of further due diligence on Centre's current loss reserve position and finalisation of the capital support provided to Centre from Zurich.”