(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)