Fitch: PXRE stays on negative watch

Fitch Ratings said the BB issuer default rating of PXRE Group Ltd. and the B+ $100 million 8.85% trust preferred securities due, 2027 of PXRE Capital Trust I remain on ratings watch negative following the reinsurer's second-quarter earnings announcement.

The ratings remain on rating watch negative due to continued uncertainty related to PXRE's future viability and business direction as the company continues to explore strategic alternatives and negotiate commutations. Fitch believes such actions often signal a distressed situation and potential run-off. Additionally, the company is in the process of replacing its current advisor, Lazard Ltd., with a new firm due to Lazard's expiring engagement and staffing changes.

Fitch also said it has concerns regarding the company's ability to continue to operate profitably given its increased expenses, reduced premium base and the potential for inadequately set reserves.

Positively, through the second quarter of 2006, PXRE did not experience material adverse loss reserve development related to its 2005 hurricane losses, and its catastrophe risk continues to be reduced since a large amount of its premium base has non-renewed or cancelled, the agency noted.

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