Fitch Puts Converium Ratings on Watch/Positive

October 19, 2006

Fitch Ratings has placed Swiss-based Converium AG’s Insurer Financial Strength “BBB-” rating on Rating Watch Positive (RWP), along with its ratings on the Group’s subsidiaries and debt. Standard & Poor’s and A.M. Best took similar action yesterday (See IJ Website Oct. 18) following the announcement that Converium has sold its North American operations to Berkshire Hathaway’s National Indemnity.

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.

“The net result of the transaction is likely to reduce the group’s shareholders’ equity of $1.796 billion reported at 30 June 2006 by $135 million. The transaction remains subject to regulatory approvals and other closing conditions.”

Fitch also indicated that it “views the proposed transaction positively as it will remove the threat of future adverse reserve development on this historically volatile portfolio of business. Significantly, 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.”

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