SCOR Acquires 32.9% of Converium; Makes Unsolicited Bid; S&P Comments

February 19, 2007

France’s SCOR Group announced that it has acquired 32.9 percent of the share capital of Swiss-based reinsurer Converium Holding AG.

SCOR said it “strongly believes that the combination of Converium and SCOR is a unique strategic opportunity to create a Top 5 global multi-line reinsurer in this time of market consolidation. This combination is based on very strong industrial, economic and financial rationales.”

Standard & Poor’s Ratings Services reacted to the news with two separate announcements. Its ratings on SCOR – currently “A-“; “A-2” (debt) with a stable outlook – “remain unchanged following this morning’s announcement.” S&P’s ratings – currently “BBB+” long-term counterparty credit and insurer financial strength ratings on Converium and its operating entities – “remain on CreditWatch with positive implications, where they were placed on Oct. 17, 2006.”

S&P noted that the “CreditWatch update follows the Feb. 19 announcement by Converium that it has received an unsolicited proposal from France-based reinsurer SCOR S.A to acquire Converium, which has been unanimously rejected by its board of directors.”

SCOR”s announcement said it had acquired the shares – 8.3 percent through direct market purchases and 24.6 percent through share purchase agreements, the consummation of which is subject to regulatory approvals- “irrevocably,” The consideration for the block acquisitions consists of 20 percent cash and 80 percent newly issued SCOR shares.

SCOR also confirmed that it had approached Converium’s board and management regarding a potential bid for the Company – “to discuss the compelling proposal to combine the companies and to solicit the Board’s recommendation for a full offer on Converium.” SCOR also noted that it “regrets the Converium Board’s initial reaction to the proposal that was published earlier today,” i.e. a flat rejection of the proposal.

S&P said it would “continue to monitor the situation as it develops, but derives significant comfort from assurances it has received from SCOR’s management that it will not do anything that could jeopardize the ratings on the group.”

The rating agency added a list of future possibilities concerning the deal, indicating that it could 1) “place downward pressure on the ratings: SCOR fails to secure the conditions for a successful bid, but proceeds nevertheless, thereby potentially damaging Converium’s franchise.” Or 2) “SCOR increases its offer price materially above its existing level of Swiss franc 21.1 per Converium share;” or 3) “SCOR is forced to significantly increase its levels of financial gearing in order to finance a bid.”

Concerning Converium’s status, S&P stated that the bid could “make Converium a target of other unsolicited takeover proposals, particularly given that a significant block of its shares is now controlled by SCOR. Nevertheless, there is no reason at this stage to believe that the current situation will impede Converium’s ability to return to a higher rating level. The remaining hurdle is the successful conclusion of regulatory investigations.

“All things being equal, when the achievement of a regulatory settlement becomes certain, Standard & Poor’s will raise its counterparty credit and insurer financial strength ratings on Converium AG and its guaranteed operating entities to ‘A-‘ and remove the ratings from CreditWatch.”

When that happens, it would be very welcome news for Converium, which lost its “A” rating in 2004.

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