Rating Agencies Ponder BMA Deal

Royal Bank would also get BMA's mutual fund company, Jones & Babson Inc., Kansas City, Mo., which has about $1.5 billion in assets under management. Royal Bank would fold Jones & Babson into RBC Dain Rauscher, Minneapolis, a U.S. broker-dealer that Royal Bank bought in January 2001.

Standard & Poor's has put BMA on "CreditWatch negative," and lowered BMA's counterparty credit and financial strength ratings to single-A, from double-A minus.

The proposed acquisition of BMA by Royal Bank "is well within the bank's stated strategy of building out its U.S. platform," Standard & Poor's says in a ratings alert. "Standard & Poor's expects BMA's operations to become fully integrated with Royal Bank's growing U.S. distribution capacity and infrastructure."

But the previous rating incorporated implicit support from the Generali group, and now Standard & Poor's is assessing BMA on a stand-alone basis, the firm says.

Moody's on the other hand, has put BMA on review for a possible upgrade.

Moody's gives an Aa3 rating to Generali's senior unsecured debt and the same rating to Royal Bank's senior unsecured debt. The key to BMA's strength will be the level of support it can expect from Royal Bank, Moody's says.

Moody's predicts acquiring BMA will help Royal Bank by increasing the size of its U.S. insurance business.

Fitch gives Royal Bank's long-term senior debt an AA rating, and it gives BMA an AA- insurance financial strength rating. The firm has put BMA on "Rating Watch Evolving."

"The Rating Watch status primarily reflects uncertainty regarding BMA's risk-adjusted capital position immediately following the close of the transaction," Fitch says. "The transfer of the reinsurance business out of BMA will have a significant effect on both the capital profile and the business risk profile of the organization."