Moody’s assigns ‘A3’ Rating to Montpelier Re

June 18, 2003

Moody’s Investors Service has assigned an A3 (“Good”) insurance financial strength rating to Montpelier Reinsurance Ltd., the Bermuda-based property catastrophe and specialty property reinsurance company, which is the main operating subsidiary of Montpelier Re Holdings Ltd., the reinsurer established by White Mountains Insurance Group and Benfield in Bermuda at the beginning of 2002.

The holding company completed an initial public offering in October 2002 raising net proceeds of approximately $201 million to augment the approximately $1 billion of capital originally furnished by the investors. Moody’s said: “Montpelier Re’s A3 insurance financial strength rating is based on consideration of its meaningful capital base, modest operating and financial leverage profile and efficient operations. Montpelier Re’s conservative operating leverage profile is enhanced by the company’s solid risk management framework. Moody’s notes that, as a newly-formed company, Montpelier Re’s balance sheet is unencumbered by historical loss exposures, and that Montpelier Re’s invested assets are of high credit quality and liquidity.”

The rating agency cautioned, however that “these strengths are tempered by the inherent volatility of property catastrophe and property risk excess of loss reinsurance business, by the company’s brief operating history and by Moody’s concerns about key-man risk, given the company’s modestly sized underwriting staff.” It also noted the reinsurer’s use of “a proprietary computer-based underwriting model, incorporating output from several third-party vendor models” that it uses to price and manage its reinsurance exposures. Moody’s indicated that, as a result, “Montpelier Re’s exposure management approach is probability-based.”

The report summarized Montpelier Re’s financial condition as follows: “As of March 31, 2003, Montpelier Re Holdings Ltd. reported GAAP shareholders’ equity of $1.36 billion. First quarter 2003 net income was approximately $104 million on total revenue of $202 million and a combined ratio of 52.8%. For 2002 the company reported net income of $152 million on total revenue of $379 million and a combined ratio of 67.4%. Full year 2002 gross premiums of $608 million were written in property specialty reinsurance, including risk excess of loss, property pro-rata and direct insurance and facultative reinsurance, property catastrophe reinsurance, qualifying quota shares and other specialty reinsurance lines.”

Anthony Taylor, Montpelier Re’s President and CEO, commented in a written statement: “We are proud to receive a Moody’s “A3″ rating, especially as a young company. Although founded less than 18 months ago, we have already accumulated a substantial capital base and a reputation for excellent service and thoughtful underwriting. The Moody’s rating reflects our solid business approach and demonstrates our financial strength to our clients.”

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