In making the changes, Fitch said it views the deal as a "modest positive" for Allmerica, since it will enable the company to focus on its property-casualty operations and "removes any lingering doubts about possible cash and capital needs the variable annuity and variable life businesses could impose on the rest of the organization."

Standard & Poor's analyst John Iten said S&P views the latest deal as "beneficial to AFC and anticipates raising the ratings by one notch following the close of the transaction."

Mr. Iten said the sale of the life unit will get Allmerica out of the variable annuity and variable universal life businesses. Allmerica placed its entire life and annuity business in runoff in 2002 after the guaranteed minimum death benefit (GMDB) feature of these products produced very substantial losses following a considerable decline in the equity markets.

The company has instituted a dynamic hedging program to mitigate the GMDB risk associated with this business, Mr. Iten said. He added, however, that "the sale of this business benefits AFC by removing this exposure completely from its books and allowing management to concentrate on its core property-casualty operations."

Standard & Poor's also views the transaction as positive for the remainder of Allmerica's life insurance business, First Allmerica Financial Life Insurance Co. (FAFLIC), and anticipates raising the ratings by two notches following the close of the transaction.

The liabilities that AFC is retaining in its life unit consist predominantly "of a well-seasoned book of low-volatility whole life and group annuity business," Mr. Iten said. FAFLIC's capital adequacy is expected to remain strong for the rating, S&P said.