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A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Lehman Re Ltd (Lehman Re) (Hamilton, Bermuda), a wholly owned subsidiary of Lehman Brothers Holdings Inc. (Lehman Brothers Holdings) (New York, NY). The rating outlook is stable. The rating reflects Lehman Re's current capitalization, limited insurance liabilities, advanced risk management capabilities and the operating and strategic benefits it receives as an integral part of Lehman Brothers Holdings and its affiliates. Additionally, Lehman Re's financial obligations are guaranteed by Lehman Brothers Holdings. Offsetting these advantages, in part, are Lehman Re's historic pattern of high dividend payments to its parent company, Lehman Brothers Holdings, Lehman Re's relatively low transaction volume of the past four consecutive years, the fluctuation in operating results due to variation in investment returns resulting from an investment strategy linked to floating rate indices and certain potential uncertainties associated with Lehman Brothers' evolving strategy. These uncertainties are related to its participation as a transformer in the insurance and reinsurance industries through investment banking, securitization and other capital markets activities, as well as non-traditional reinsurance. Lehman Re operates as an "intermediary/transformer/agent/advisor" between the capital and insurance markets, using other Lehman Brothers' affiliates like Lehman Risk Advisors (LRA), a licensed U.S. insurance and reinsurance intermediary. These affiliates facilitate structured transactions and manage insurance risks for corporate clients via reinsurance or capital market transactions, along with possible retention of prudently modeled and priced risk, restructuring, repackaging and redistributing risk involving structured financing techniques through securitization. Lehman Brothers has integrated Lehman Re into its full array of risk management and control processes, confirming Lehman Re's centrality to its parent's strategic objectives. Lehman Brothers provides Lehman Re with risk management and underwriting capabilities. A.M. Best recognizes the risks associated with Lehman Brothers' transaction-based strategy and continues to closely monitor Lehman Re's performance and risk management results and the sensitivity of its economic capitalization to changes in market conditions. This includes a continuing review of Lehman Brothers' strategy and capabilities in managing insurance and other risks through Lehman Insurance Products Group and the interplay with Lehman Re's risk management strategy. For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.
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