Ratings agencies are viewing Allmerica Financial Corporation's decision to divest most of its life operations as a strong positive for the company's property-casualty businesses.

Both Fitch and Standard & Poor's reacted to Allmerica's decision by upgrading the credit rating of certain of Allmerica's corporate securities, affirming the credit rating of some of the company's p-c subsidiaries and placing others on credit watch positive.

Allmerica announced Tuesday it has agreed to sell its variable life insurance and variable annuity businesses to Goldman Sachs Group Inc. Those units were the last of its life insurance business, which it put into runoff in 2002.

In announcing the sale, expected to close by November, Allmerica said it will ask the Massachusetts Division of Insurance for a dividend of $40 million from its remaining life business. It projects total cash proceeds from the sale and the dividend to be about $385 million.

In making the changes, Fitch said it views the deal as a "modest positive" for Allmerica, since it will enable the company to focus on its property-casualty operations and "removes any lingering doubts about possible cash and capital needs the variable annuity and variable life businesses could impose on the rest of the organization."

Standard & Poor's analyst John Iten said S&P views the latest deal as "beneficial to AFC and anticipates raising the ratings by one notch following the close of the transaction."

Mr. Iten said the sale of the life unit will get Allmerica out of the variable annuity and variable universal life businesses. Allmerica placed its entire life and annuity business in runoff in 2002 after the guaranteed minimum death benefit (GMDB) feature of these products produced very substantial losses following a considerable decline in the equity markets.

The company has instituted a dynamic hedging program to mitigate the GMDB risk associated with this business, Mr. Iten said. He added, however, that "the sale of this business benefits AFC by removing this exposure completely from its books and allowing management to concentrate on its core property-casualty operations."

Standard & Poor's also views the transaction as positive for the remainder of Allmerica's life insurance business, First Allmerica Financial Life Insurance Co. (FAFLIC), and anticipates raising the ratings by two notches following the close of the transaction.

The liabilities that AFC is retaining in its life unit consist predominantly "of a well-seasoned book of low-volatility whole life and group annuity business," Mr. Iten said. FAFLIC's capital adequacy is expected to remain strong for the rating, S&P said.

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Ratings Agencies Affirm Allmericas Move To Sell Life Business

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