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TEXT-S&P puts Ariel Reinsurance 'A-' ratings on watch negative
March 1, 2012 / 8:17 PM / in 6 years

TEXT-S&P puts Ariel Reinsurance 'A-' ratings on watch negative

 (The following statement was released by the rating agency)	
Overview	
  -- Ariel Re has signed an agreement to sell its operations (excluding the 	
credit and surety business and Atrium quota share reinsurance agreement) to 	
Arrow Corporate Member Holdings LLC, a subsidiary of Goldman Sachs.  	
  -- The remaining entity will have substantially reduced internal 	
underwriting operations, a smaller capital base, less managerial resources, a 	
reduced enterprise risk management framework, and limited ability to raise 	
capital from third parties.	
  -- As a result, we have placed the 'A-' ratings on Ariel Re on 	
CreditWatch with negative implications.  	
Rating Action	
On March 1, 2012, Standard & Poor's Ratings Services placed its 'A-' 	
counterparty and financial strength ratings on Ariel Reinsurance Co. Ltd. 	
(Ariel Re) On CreditWatch with negative implications.	
	
Rationale	
The CreditWatch listing reflects our prospective view of Ariel Re's business 	
profile following the closing of a proposed sale of the majority of Ariel Re's 	
operations to Arrow (not rated). The agreement between Ariel Re and Arrow 	
effectively removes all operations, unearned premiums, and loss reserves from 	
Ariel Re, excluding the credit and surety (C&S) operations and Atrium quota 	
share. The C&S operations and Atrium will be the only remaining sources of 	
businesses for the company. Also, the company's capital base will be 	
significantly smaller, but we expect it to remain strong enough to support 	
ongoing operations. However, the reduction of internal underwriting operations 	
and capital diminishes our view of the company's future competitive position. 	
With the Ariel Holdings Ltd.'s CEO (George Rivaz), the majority of the staff, 	
and most of Ariel Re's operating assets moving to Arrow, the company will be 	
left with fewer managerial resources. Also, with the movement of personnel and 	
assets, the enterprise risk management functions of the organization will be 	
substantially reduced.  	
	
We expect the C&S operation to be divested shortly after closing, leaving only 	
the Atrium quota share with Ariel Re. The operating performance of Atrium has 	
been good in the past, providing Ariel Re an ongoing stream of operating 	
profits. However, we view the existing structure of the Atrium quota share 	
agreement as uncertain. 	
	
In addition, we believe that Ariel Re's financial flexibility will be limited 	
following the sale as third-party financing could be difficult to access.	
	
CreditWatch	
Upon closing of the proposed sale, we will likely lower Ariel Re's ratings, 	
which we expect will remain investment grade. The closing is targeted for 	
April 1, 2012. In the interim, we will monitor Ariel Re for any significant 	
developments. 	
	
Related Criteria And Research	
  -- Interactive Ratings Methodology, April 22, 2009	
  -- Evaluating Insurers' Competitive Positions, April 22, 2009 	
  -- Financial Flexibility, April 22, 2009	
	
Ratings List	
Ratings Affirmed; CreditWatch Action	
                                     To                 From	
Ariel Reinsurance Co. Ltd.	
 Counterparty Credit Rating	
  Local Currency                        A-/Watch Neg/--    A-/Stable/--	
 Financial Strength Rating	
  Local Currency                        A-/Watch Neg/--    A-/Stable/--	
	
 	
	
Complete ratings information is available to subscribers of RatingsDirect on 	
the Global Credit Portal at www.globalcreditportal.com. All ratings referenced 	
herein can be found on Standard & Poor's public Web site at 	
www.standardandpoors.com. Use the Ratings search box located in the left 	
column.	
	
 (New York Ratings Team)	
 

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