Fitch Ratings said after Converium's announcement that it is selling of its North American runoff operations that it was placing the Swiss-based insurer on Rating Watch Positive.
Converium AG's Insurer Financial Strength rating with Fitch is BBB minus RWP. The agency said it has also placed other ratings within the Converium group on Rating Watch Positive.
Converium's said it has agreed to sell its North American operations to the Berkshire Hathaway Group for $95 million in cash. In addition, Berkshire Hathaway will assume $200 million of senior debt from the North American operation.
Fitch said it will review additional information on the sale of Converium's North American operations as it becomes available and will resolve the group's Rating Watch status when the transaction closes.
Upon closure, Converium's ratings will either be affirmed or upgraded. Any upgrade is likely to be up to two rating notches, Fitch said.
Fitch estimates the net result of the transaction is likely to reduce the group's shareholders' equity of $1.8 billion reported June 30 by $135 million. The transaction remains subject to regulatory approvals and other closing conditions.
The rating agency said it views the proposed transaction positively as it will remove the threat of future adverse reserve development on a "historically volatile portfolio of business."
It said it was significant that Converium has not provided guarantees or indemnities relating to the reserves of the North American operations.
In addition, management time will be freed up from the day-to-day administration of the run-off and the sale should improve the group's consolidated expense ratio, according to the Fitch analysis.
Converium group ratings are listed below:
o Converium AG's IFS BBB minus on RWP.
o Converium AG's Issuer Default rating BBB minus on RWP.
o Converium Insurance (UK) Limited's IFS BBB minus on RWP.
oConverium Ruckversicherungs (Deutschland) AG's IFS BBB minus on RWP.
o Converium Holding AG's IDR BB on RWP.
o Converium Finance S.A.'s $200 million subordinated debt due 2032 BB plus' on RWP.
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