MOODY'S PLACES THE RATINGS OF USF&G CORPORATION AND SUBSIDIARIES ON REVIEW FOR POSSIBLE UPGRADE, FOLLOWING ANNOUNCEMENT OF ACQUISITION BY THE ST. PAUL COMPANIES, INC.
New York, 01-21-98 -- Moody's Investors Service has placed the ratings of USF&G Corporation and its subsidiaries under review for possible upgrade (USF&G Corporation senior debt at Baa2) following the company's announcement that it has signed a definitive agreement to be acquired by The St. Paul Companies, Inc. St. Paul (which is rated Aa1 insurance financial strength) will pay $2.8 billion for the transaction and will assume approximately $400 million in debt and $300 million in capital securities. St. Paul is a Minnesota-based property and casualty insurance company with reported assets of $21.5 billion and equity of $4.4 billion as of September 30, 1997.
In its review, Moody's will evaluate the benefits that may accrue to bondholders and policyholders of USF&G resulting from its ownership by the financially stronger organization. According to the rating agency the review will focus on the strategic fit of USF&G within St. Paul's existing insurance operations, and synergies to be realized with the firm's distribution systems and product offerings. Moody's noted that the merger should provide increased operating efficiencies but will present challenges associated with integrating USF&G's operations into St. Paul. Further, Moody's rating review of Fidelity and Guaranty Life Insurance Company will consider the degree of strategic importance that life insurance will enjoy under the new operational structure.
Ratings for members of the USF&G group have been placed under review for possible upgrade include the following:
USF&G Corporation – senior debt at Baa2; senior debt shelf registration at (P) Baa2; subordinated debt at Baa3; junior subordinated debt at Ba1; junior subordinated debt shelf registration at (P) Ba1.
USF&G Capital I -- "baa3" rating of the Capital Securities, Series A.
USF&G Capital II -- "baa3" rating of the Capital Securities, Series B.
USF&G Capital III -- "baa3" rating of the Capital Securities, Series C.
United States Fidelity and Guaranty Company -- insurance financial strength at A3.
Fidelity and Guaranty Life Insurance Company -- insurance financial strength at Baal.
USF&G Corporation, through its subsidiaries, is engaged in both property & casualty and life insurance. USF&G is headquartered in Baltimore, Maryland, and reported consolidated assets of $14.9 billion and equity of $1.9 billion as of September 30, 1997.
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