The following day, Kemper announced it would acquire the renewal rights to a portion of Reliance National’s book of business. Meanwhile, Standard & Poor’s has lowered its ratings on Reliance and related entities following the announcement of the sales.
The ratings actions reflect Standard & Poor’s concern that the franchise value of Reliance has been significantly diminished as its specialty lines of business are being sold. S&P analysts are closely monitoring the situation, questioning whether Leucadia National Corp., which offered in May to purchase Reliance in a $293 million stock swap, will complete the due diligence phase of the offer.
Pending the resolution of the due diligence review, the ratings will remain on CreditWatch with developing implications, where they were placed on May 26.
“Certainly, the sale of these business units begs the question, “will Leucadia proceed with the purchase?” I think the jury’s still out on that one,” said Matthew Coyle, a director with S&P’s U.S. non-life insurance rating department.
And, according to Coyle, the potential for further sales by Reliance exists, though Reliance spokesperson Alice Urbanski would not comment on the issue or whether Leucadia had reacted to the sales.
“I’m sure they will have the opportunity to review the issue during the due diligence process,” she said.
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