counterparty credit ratings of La Salle Re Ltd. (LaSalle Re), but said the outlook is negative.

At the same time, Standard & Poor's affirmed its triple-'B' preferred stock and counterparty credit ratings of the parent, LaSalle Re Holdings Ltd., and revised the outlook to negative from stable.

The outlook revision reflects a decline in the quality of capital over the past year that reflects LaSalle Re's aggressive management of capital. The current ratings encompass the expected implementation of a well-conceived business plan that will promote overall improvement to the quality of capital and aggregate exposure management.

S&P said additional rating factors included: Strong Operating Performance: LaSalle Re's profit margin, as measured by return on revenue, equated to 61.6 percent for the fiscal year ended September 30, 1997, and has averaged 51.3% over the last four fiscal years. The return on equity is 24.2 percent, which remains above the company's four-year average of 22.61 percent.

Shareholder Relationship: Shareholder Aon Corp., as the largest global producer, provides LaSalle Re greater market exposure especially in Europe where Aon is a well known property catastrophe broker. Shareholder CNA Insurance Co., through its cessions to LaSalle Re, provides geographical diversity of written exposures through its existing international property catastrophe reinsurance book of business.

Good Diversification of Risk Exposure: For 1997, LaSalle Re's highest concentrations for net writings were in the following zones: United States (44.9 percent); Europe, excluding the United Kingdom (11.11 percent); and the United Kingdom (9.1 percent). Conversely, S&P said LaSalle Re limited aggregate exposures in geographic zones to a gross total sum insured, which is based on a percentage of its shareholders equity. Standard & Poor's said it believes this level is higher than most of its market peers.

Capital adequacy: Standard & Poor's catastrophe model equaled 114 percent, which suggests that the company's capital base in relation to its catastrophic risk exposures is lower than the current rating category assigned.

Management strategy: LaSalle Re has actively managed its capital structure to remain attractive to its investors by having large dividend payouts (50-60 percent of prior fiscal year-end earnings), and share repurchases.

Lack of Product Diversification: S&P said for fiscal 1997, property catastrophe reinsurance encompassed 80 percent of the company's book of business.