Liberty Mutual's purchase of Ironshore – just over a year after the latter was bought by Fosun International, China’s largest conglomerate - has stirred up a positive reaction among rating agencies.
Liberty Mutual will acquire 100 percent ownership interest in Ironshore through a stock purchase agreement believed to be worth around $3 billion pending closing price adjustments.
AM Best has placed the financial strength rating and the long-term issuer credit rating of Bermuda-based Ironshore Insurance, and its affiliated operating companies: under review with developing implications.
The credit rating actions follow the announcement that Ironshore’s ultimate parent, Fosun International Fosun, and Liberty Mutual have entered into a definitive agreement where Liberty Mutual will acquire 100 percent ownership of Ironshore and its subsidiaries for approximately 1.45 times Ironshore’s tangible book value per share, which is estimated to be approximately $3 billion.
AM Best views this transaction positively for Ironshore’s ratings, as it will resolve any potential concerns associated with the credit profile and financial leverage position of its current parent, Fosun.
However, should the transaction not be completed as planned and Ironshore remains exposed to these financial pressures, negative rating actions could occur, depending on the exact circumstances surrounding the desolution of the pending acquisition agreement, AM Best said.
The transaction is expected to close in the first half of 2017. AM Best will continue to monitor the transaction for any future developments.
Meanwhile, S&P Global Ratings has affirmed the BBB long-term counterparty credit ratings on Ironshore and removed them from CreditWatch Negative where it initially placed them in May 2015. The outlook is stable.
S&P Global Ratings credit analyst Tracy Dolin said the move was because it regards Ironshore as strategically important to Liberty Mutual group following the deal closing.
“This designation recognises our view of the importance of Ironshore to Liberty Mutual in its long-term strategy, and its historical success and strong capabilities in product innovation, data analytics, and predictive modelling,” Dolin said.
“Despite these strengths, a newly acquired subsidiary creates heightened potential for unanticipated risks, particularly during the first two years after the acquisition. These risks are slightly elevated because Ironshore was acquired by Fosun International less than two years ago.
“Nevertheless, our issuer credit rating on Ironshore remains the same as that on Liberty Mutual. To determine the ratings on Liberty Mutual's nonoperating holding companies-–including Ironshore Inc. and Ironshore Holdings (U.S.) Inc.--we start with the group credit profile of 'a' and apply three notches of subordination, reflecting the higher degree of structural subordination in the US.”
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