Troubled Bermuda insurer Trenwick saw its share price take another nose dive yesterday after investors reacted to news of a rating downgrade from Standard & Poors (S&P).

The company saw its shares fall nearly 40 percent yesterday to a new 52-week low of 66 cents. Yesterday's share price tumble followed the company's shares taking another 40 percent dive on Friday after it released its third quarter results showing a nearly $140 million net loss.

Along with the rating downgrade, rating agency S&P questioned the company's ability to carry on as an ongoing concern.

It voiced its concerns at the time of lowering the company's credit rating from B to CCC+ and put the rating on credit watch negative which indicated the company's financial strength could be lowered further. The ratings were originally placed on CreditWatch with negative implications on October 21, 2002.

S&P credit analyst Karole Dill Barkley said: "With reserve additions there is a diminished likelihood of sufficient dividends from the operating companies and, as a result, more uncertainty surrounding Trenwick's ability to meet its 2003 debt repayment and debt service requirements."

She added: "Considerable uncertainty remains about whether banks will renew letters of credit that allow continued underwriting at Lloyds, as well as the potential for additional reserve development from the fourth-quarter 2002 reserve study."

The S&P said creditors under Trenwick's credit agreement were expected to decide by next week - November 22 - whether to renew and extend the group's $230 million letters of credit.

And the rating agency warned that if the banks were to elect not to renew, or to demand cash collateral, there could be "substantial doubt as to Trenwick's ability to continue underwriting at Lloyds or continue as an ongoing concern". In addition, Trenwick management has disclosed that it may be forced to seek protection from creditors.

Meanwhile, S&P said it would continue to monitor developments: "We will review the ratings following the bank decision whether to extend its letters of credit at Lloyds, following the completion and Standard & Poor's review of a third-party reserve study currently underway for all key operating platforms, and after any other material developments. At that time, ratings on the entitities could be affirmed or lowered," it said.

Beyond the losses and rating downgrades, the company was also delisted recently from the Bermuda Stock Exchange (BSX) and ceased to write US Specialty business after a recent deal struck with Chubb Re. Earlier in the year the company also effected a 100 percent quota share reinsurance agreement with new Bermuda insurer Endurance, on in-force business from its property catastrophe subsidiary LaSalle.