S&P Lowers Cooperativa de Seguros to ‘A-‘, Off CreditWatch

October 10, 2003

Standard & Poor’s Ratings Services announced that it has lowered its counterparty credit and financial strength ratings on Cooperativa de Seguros Multiples de Puerto Rico to ‘A-‘ from ‘A’ and removed them from CreditWatch with a stable outlook.

S&P noted that the ratings had been placed on CreditWatch after Cooperativa announced an agreement to buy Royal & Sun Alliance Insurance (Puerto Rico) Inc. (RSA PR), the Puerto Rican subsidiary of the U.K.’s Royal & Sun Alliance Insurance Group PLC.

“The rating action reflects the uncertainties associated with the acquisition, the imminence of the financing, and the integration of RSA PR into Cooperativa’s existing operations,” said the bulletin. “Also considered were management’s ability to execute the business strategy of the combined organization, obtain adequate reinsurance, and maintain overall profitability despite heavy geographic concentration in Puerto Rico.”

On the positive side S&P noted that “Cooperativa’s risk-adjusted capitalization is projected to remain extremely strong following the RSA PR purchase. Cooperativa remains one of the strongest property/casualty insurance companies in Puerto Rico, with a significant market share after the RSA PR acquisition.

“Effective Oct. 8, 2003, Cooperativa obtained full control of its new subsidiary upon regulatory approval of the transaction and paid $61 million in cash, which is about 33% of its surplus and will be subject to accounting adjustment. The size of RSA PR’s commercial lines operations and Cooperativa’s personal lines operations are similar.”

S&P indicated it would “continue to evaluate the execution of the combined business strategy and the company’s ability to maintained overall profitability.”

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