RELIANCE GROUP RATINGS UNAFFECTED BY SALE

RELIANCE GROUP RATINGS UNAFFECTED BY SALE

The ratings of Reliance Group Holdings Inc. and its related entities are not affected by the parent's definitive agreement to sell its General Casualty Cos. subsidiary to Winterthur Swiss Insurance Co. for $630 million in cash, Standard & Poor's said.

Ratings include: Reliance Group Holdings Inc.'s single B+ senior debt and single B-subordinated debt; Reliance Group Inc.'s single B+ subordinated debt; Reliance Financial Services Corp.'s triple B senior debt; Reliance Insurance Co. Intercompany Pool's single A claims-paying ability rating and single A- preferred stock; Reliance Premium Credit Corp.'s A-1 collateralized Eurocommercial paper; and United Pacific Life Insurance Co.'s single A claims- paying ability rating.As a result of the agreement, Reliance is expected to realize a pretax gain of about $380 million during the second quarter. This gain will be primarily used to strengthen the statutory surplus of Reliance's insurance operating subsidiaries, which S&P said it views as a positive measure in light of these subsidiaries' exposure to deteriorating conditions in the high-yield bond market.

However, the sale of General Casualty will, in S&P's estimation, leaves Reliance with a more risky property/casualty product mix that is less diversified geographically.

S&P will be having further discussions with Reliance regarding use of the proceeds from the sale.

Another benefit resulting from the sale of General Casualty is the improvement in consolidated financial leverage, with the ratio of total debt to capitalization expected to be around 67 percent, down from about 80 percent at the end of 1989.