OLDWICK, N.J., May 07, 2008 (BUSINESS WIRE) -- A.M. Best Co. has downgraded the financial strength rating (FSR)
to A (Excellent) from A+ (Superior) and assigned an issuer credit
rating (ICR) of "a" to Lehman Re Limited (Lehman Re) (Hamilton,
Bermuda). Lehman Re is a Bermuda domiciled life and non-life reinsurer
with a GAAP equity of $372 million (as of December 31, 2007) and a
wholly owned subsidiary of Lehman Brothers Holdings Inc. (Lehman
Brothers) (Delaware) (NYSE: LEH). The outlook for the FSR is stable,
and the outlook assigned to the ICR is stable.

These rating actions are based on Lehman Re's modest business
profile relative to stand alone market leading reinsurance businesses
and characterized by very low transaction volume prior to 2007.
Overall, Lehman Re retains a modest level of insurance liabilities
arising from its core risk management solutions, securitizations and
structured transactions business lines. Significant transaction
activity--to the extent that A.M. Best expected in its rating
assignment--did not materialize. In addition, earlier shareholder
dividends reduced the overall capital levels subsequent to the rating
assignment. However, A.M. Best notes that no dividend payments have
been made over the last two years, and that no shareholder dividends
are planned for 2008.

In its role as a conduit for reinsurance business to Lehman
Brothers for capital market execution, Lehman Re has not demonstrated
consistent growth over time. In A.M. Best's opinion, a business
strategy that takes into account the uncertainties of the reinsurance
business and results in a generally stable and predictable flow of
business will improve the business model going forward.

Although Lehman Re maintains ample capital for its current risk
profile, the capital position will need to be kept under review as the
business grows. Nevertheless, Lehman Re's ratings recognize its
current strong capitalization, generally increasing profitability and
growing property/casualty transformer business. A.M. Best believes
that Lehman Re's capital position, in-house expertise and access to
principals in the life and non-life reinsurance industry should allow
it to further develop reinsurance applications of capital market
solutions.

For current Best's Ratings, independent data and analysis on more
than 330 reinsurance companies, please visit
www.ambest.com/reinsurance.

Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals
and health care system providers. For more information, visit
www.ambest.com.

SOURCE: A.M. Best Co.

A.M. Best Co.
Analysts:
Ed Eyring, 908-439-2200, ext. 5123
edward.eyring@ambest.com
or
William Pargeans, 908-439-2200, ext. 5359
william.pargeans@ambest.com
or
Public Relations:
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com

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