Best Downgrades Converium AG

A.M. Best Co. has downgraded the financial strength ratings of Converium AG (Switzerland) and its rated core subsidiaries (collectively referred to as Converium) to “A-” (Excellent) from “A” (Excellent). At the same it has downgraded all issuer credit ratings and related debt issues and placed all ratings under review with negative implications. (See full list of ratings below.)

These actions follow the announcement of further adverse reserve development. Best has been factoring further adverse reserve development in its ratings for some time, but the effect of this reserve action will cause second quarter results to fall below expectations. The problem is primarily due to U.S. casualty losses related to the underwriting years 1997 to 2001, which will be bolstered by up to USD 400 million. It will trigger net impairments of up to USD 289 million of deferred tax assets and USD 94 million of goodwill, negatively affecting the balance sheet of Converium Reinsurance (North America) Inc.

Best is currently assessing the full impact of this reserve strengthening and discussing with management any plans for raising new capital. Best aims to resolve the under review situation as soon as possible. In addition, Best is reviewing the core status of Converium Reinsurance (North America) Inc. and Converium Insurance (North America) Inc.

The financial strength rating has been downgraded to “A-” (Excellent) from “A” (Excellent) and the issuer credit rating has been downgraded to “a-” from “a” for the following companies:

· Converium AG
· Converium Rueckversicherung (Deutschland) AG
· Converium Reinsurance (North America) Inc.
· Converium Insurance (North America) Inc.
· Converium Insurance (UK) Ltd

The issuer credit rating has been downgraded to “bbb-” from “bbb” for Converium Finance S.A.

The issuer credit rating has been downgraded to “bb+” from “bbb-” for Converium Holdings (North America) Inc.

The following debt rating has been downgraded to “bbb” from “bbb+”:

Converium Finance S.A.—
— USD 200 million 8.25 percent guaranteed subordinated notes, due December 2032 (guaranteed by Converium Holding AG and Converium AG)

The following debt rating has been downgraded to “bb+” from “bbb-“:

Converium Holdings (North America) Inc.—
— USD 200 million 7.125 percent unsubordinated senior notes, due October 2023 (originally issued by Zurich Reinsurance Centre Holdings, Inc and assumed by Converium Holdings (North America) Inc).