S&P Puts Converium on CreditWatch/Negative

November 7, 2005

The fallout from Converium’s announcement that it would restate earnings and delay publication of its third quarter results (See IJ Website Nov. 4) was not long in coming. Standard & Poor’s Ratings Services announced that it has placed its “BBB+” long-term counterparty credit and insurer financial strength ratings on Converium AG and the guaranteed operating entities of the Converium group on CreditWatch with negative implications.

S&P also said it has “placed its ‘BB+’ long-term counterparty credit and senior unsecured debt ratings on Converium Holdings (North America) Inc. and its ‘BBB-‘ long-term guaranteed junior subordinated debt rating on Converium Finance S.A. on CreditWatch with negative implications.”

“The CreditWatch placement follows Converium’s announcement today that, following an internal review of certain reinsurance transactions primarily relating to ceded reinsurance, it plans to restate its financial accounts and delay its third-quarter results release, and reflects the uncertainties surrounding this event,” stated S&P credit analyst Marcus Rivaldi.

S&P said it “aims to resolve the CreditWatch status following receipt of the restated financials and third-quarter results, currently scheduled for mid-December 2005.” It also gave the following possible repercussions on the ratings indicating that they “may be affirmed and a stable outlook assigned if (1) Standard & Poor’s view on prospective group capitalization and operating performance is subsequently confirmed, (2) there is no material deviation from the management’s current expectation of no reduction in unaudited shareholders’ equity reported for June 30, 2005, (3) there is no significant negative regulatory action or negative impact on financing arrangements resulting from the restatement action, and (4) in the meantime, there is an early indication that Converium retains the support of its key European client base and key staff.”

On the other hand S&P stated that the “outlook may be revised to negative or the ratings lowered if these expectations are not met, the latter course of action being likely if, during the course of the CreditWatch placement, Converium appears unable to retain the support of its key European client base and key staff. If the ratings are lowered, it is not envisaged that this would be by more than one notch.”

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