Bermuda based insurance company Trenwick has had its A.M. Best rating put under review after the agency questioned the current loss reserve and expressed an uncertainty in the company's ability to restore profit levels in the near term.

The agency also pointed to the Trenwick Group's recent poor performance due to losses reported in the second quarter.

Trenwick had an "A" excellent financial rating from Best, but yesterday the company under review with negative implications.

A.M. Best also placed all related debt ratings as indicated below under review with negative implications.

Best said in a release: "These actions follow the group's second quarter earnings release which reported additional reserve strengthening - the third such action since 1999.

"The under review status reflects A.M. Best's concern with regard to the adequacy of Trenwick's current loss reserve position and the uncertainty in its ability to restore profitability to levels commensurate with an "A" rating over the near-term.

"As a result of recent poor performance, Trenwick's ability to service its fixed obligations has been further weakened. Moreover, the financial leverage of the group, as measured by debt-plus-preferred to total adjusted capital has risen to 35 percent due to losses reported in the second quarter."

Earlier this month the insurance and reinsurance group Ltd. posted a second-quarter loss of $50.8 million after making a profit in the same quarter last year, citing losses from Tropical Storm Allison and other storms in the Midwest United States.

Hamilton-based Trenwick said it lost $50.8 million, or $1.38 per share, in the second quarter, from a profit of $11.3 million, or 71 cents a share, a year ago.

On an operating basis, Trenwick lost $49.8 million in the quarter and said it now expects earnings in the second-half of the year to be in the range of 65 cents to 75 cents a share, excluding unusual losses.

Trenwick updated its second-half guidance, it said, to account for the raising of forecast loss ratios for the next sixth months in light of recent losses.

In July the company received a further blow when ratings agency Standard & Poor's also placed the group and its related entities on CreditWatch with negative implications.

Their report stated: "This rating action follows the announcement of a reserve strengthening in the amount of $51.6 million after taxes and other adjustments, which will affect second-quarter 2001 operating profitability. Trenwick Group Ltd.'s operating performance has been below Standard & Poor's expectations since 2000. These adjustments - coupled with other reserve additions in 2000suggest that weaker operating performance persists through 2001.

Best said that this will continue to place pressure on the capitalisation levels at the operating companies and potentially restrict capital formation due to the parent's dependence on dividends to service debt obligations.

Best said that these ratings will remain under review pending further due diligence by A.M. Best on the group's loss reserve position and discussions with management regarding its operating and capital strategies.In September 2000 Trenwick Group Inc., La Salle Re Holdings Ltd. and La Salle Re Ltd joined together.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, see www.ambest.com. or www.standardandpoors.com/ratingsdirect.