A.M. Best Assigns Prospective Rating to the Converium Group.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Sept. 11, 2001 A.M. Best Co. has assigned a prospective group financial strength rating of A (Excellent) to the newly formed Converium Group, which comprises substantially all of the third party reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. operations of Zurich Financial Services Zurich Financial Services Group is a major financial services group based in Zurich, Switzerland. Global operations North America The US consumer market is served primarily by Farmers Insurance Group the third largest personal lines property & casualty insurance (ZFS (1) (Zettabyte File System) A distributed file system from Sun that was added to OpenSolaris in 2005 and Solaris 10 in 2006. With support for 128 bits, compared to 64 for NTFS and other contemporary file systems, storage capacity is unlimited for all practical ), currently managed under the Zurich Re brand. ZFS announced that it would enter into a series of transactions, which will have the effect of formally separating Converium from ZFS by way of an IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. . In assigning its rating to Converium, A.M. Best has lowered the financial strength ratings of Zurich Reinsurance (North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. ) Inc., ZC Insurance Company and Zurich Reinsurance (Cologne) Ltd. - formerly rated A+ (Superior) as part of ZFS's group rating to A and has removed these ratings from under review. These entities will be renamed Converium Reinsurance (North America) Inc., Converium Insurance (North America) Inc. and Converium Reinsurance (Germany) Ltd., respectively, under the new ownership structure. In addition, existing senior notes that will be assumed by Converium Holdings (North America) Inc., a newly formed holding company, that will be the direct parent of Converium Reinsurance (North America) Inc., have been assigned an "a-" senior debt rating. Converium Holding Ltd., through a series of transactions, will be an independent, publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. capitalized with at least $1.6 billion of equity. The initial public offering, expected to be completed during the fourth quarter of 2001, is the result of the ZFS announcement earlier this year to exit the reinsurance business. The rating reflects the group's excellent capitalization, strong balance sheet, low A&E exposure and established distribution system. Converium will start with a strengthened capital base demonstrated by low financial leverage (under 20%) and excellent capital adequacy, which should provide a cushion and allow the company to support its growth initiatives. The group will also retain the prior Zurich Re senior management, thereby providing continuity of operations The degree or state of being continuous in the conduct of functions, tasks, or duties necessary to accomplish a military action or mission in carrying out the national military strategy. . As a result of a thorough review by external actuaries, loss reserves were strengthened by $112 million during the second quarter of 2001, allowing Converium to correspond with the external actuaries' best estimate of loss reserves at December 31, 2000. Furthermore, the group has been actively engaged in re-underwriting its book of business, resulting in the non-renewal of under-performing business, improved terms and conditions and increased rates. Offsetting these positive factors is the group's historical operating under-performance compared to its reinsurance peers. A.M. Best believes, however, that corrective actions A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or taken by management to strengthen the balance sheet, tighten underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. guidelines and reposition the book of business has positioned the company for improved earnings more in line with its rating level. Nevertheless, market uncertainty created by the separation of the group from ZFS and its new brand identity coupled with continued competitive conditions could challenge the group. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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