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Converium regains A- rating from S&P


ZUG, Switzerland--Amid an escalating battle for ownership of Converium Holding Ltd., Standard & Poor's Corp. has upgraded its financial strength rating on the Swiss reinsurer to A- from BBB+.

Zug, Switzerland-based Converium, the subject of an unsolicited takeover bid from Paris-based rival SCOR S.A., said that regaining an A-level rating marked "the full completion of Converium's turn-around."

The change to Converium's rating is the result of a long and analytical process, according to a spokeswoman for S&P, who noted that the rating had been placed under review as long ago as October. The timing of the announcement is coincidental, she noted.

S&P said in a statement that the upgrade reflects the rating agency's belief that Converium will settle with regulators in the United States over their investigation of the reinsurer's restatement, announced in 2005, to correct the accounting for certain finite reinsurance transactions (BI, Dec. 26, 2005). S&P said this followed an independent study commissioned by Converium of recent settlements with the Securities and Exchange Commission over similar issues.

The rating agency said that although the cost of a settlement between Converium and the SEC is not yet certain, it believed the reinsurer's capital adequacy likely will remain consistent with an A- rating, even if it is in excess of the upper limit of settlement amounts revealed by the study.

S&P said the rating had a stable outlook, reflecting its expectation that Converium's combined ratio would be less than 100% for 2007.

While a revision of that outlook is unlikely in the medium term, according to S&P, it could be revised to negative if SCOR is successful in its takeover bid and key European clients or staff leave Converium as a result, among other things.

Converium was downgraded out of the A range by S&P in 2004 in large part because of reserve boosts needed to shore up its loss-plagued U.S. business, which was later put in runoff. The reinsurer last year sold its North American reinsurance operations to a unit of Berkshire Hathaway Inc.

Meanwhile, Converium last week said its board of directors "continues to be unanimous in its rejection" of SCOR's offer for the company.

Converium said late Monday that it believes SCOR's unsolicited offer of 21.10 Swiss francs ($17.11) per share failed to recognize the value of Converium's franchise.

SCOR on Monday outlined an offer for the 67.1% of the Zug, Switzerland-based reinsurer it does not already own. Earlier this month, Paris-based SCOR had acquired 32.9% of the share capital of Converium.

A merger of the two reinsurers, SCOR said Monday, would create a top-five global reinsurer.

Earlier, in an analyst call to explain the offer, SCOR Chairman and Chief Executive Denis Kessler said the French reinsurer believed a merger of the two groups made sense for both parties and that SCOR's offer, while unsolicited, was "friendly."

Meanwhile, Converium last week announced net income of $57 million for 2006.

The reinsurer said its gross written premiums increased by 1.3% last year to $1.98 billion, while its nonlife combined ratio improved to 96.3% in 2006 from 107.0% in 2005.