AM Best has downgraded the financial strength rating of Converium AG and certain rated subsidiaries from A- (excellent) to B++ (very good).
At the same time, the ratings agency also downgraded Converium's issuer credit rating from a- to bbb.
The issuer credit ratings on each of these companies reflect AM Best's opinion, expressed on the credit market scale, of Converium's overall ability to meet its senior obligations, which are insurance policies. As a result both the issuer credit rating and the financial strength ratings are at the same level, it said.
Concurrently, AM Best has downgraded all rated debt issues accordingly.
The ratings remain under review with negative implications pending the successful raising of the proposed $420m via a share issue, which is in the process of being underwritten, said the ratings agency.
Following the announcement that Converium Reinsurance North America is to be placed into run-off, AM Best has downgraded the financial strength rating to B- (fair) from A- (excellent) and the issuer credit rating to “bb-” from “a-”.
This rating has been removed from under review and a negative outlook has been assigned, it said.
These rating actions follow the negative implications status under which all Converium ratings were placed on July 20, 2004, following the release of 2004 half-year results.
These results were below expectations primarily due to the need to strengthen reserves by $400m on U.S. casualty losses related to the underwriting years 1997 to 2001.
The downgrades reflect the deterioration of Converium's consolidated risk-based capital due to the potential for further reserves development, despite Converium's intention to further bolster its reserves by between $50m and $100m before year-end 2004 and the acquisition of a stop-loss agreement with National Indemnity.
The ratings also factor the planned reduction of consolidated premiums and the restructuring of the North American operations, as well as the successful raising of the proposed $420m via a share issue, said AM Best.
