A.M. Best Assigns Indicative Debt Ratings for Montpelier Re Holdings Ltd.’s Shelf Registration

February 16, 2004

A.M. Best Co. has assigned indicative ratings of “bbb” senior unsecured debt, “bbb-” subordinated debt and “bb+” preferred stock to Montpelier Re Holdings Ltd.’s (Montpelier) (Bermuda) recently filed $500 million universal shelf offering.

A.M. Best has also affirmed the debt rating of “bbb” on Montpelier’s $250 million 6.125 percent senior unsecured note, due 2013. Concurrently, A.M. Best has assigned an indicative debt rating of “bb+” preferred securities to MRH Capital Trust I (U.S.), which will be fully guaranteed by Montpelier. The outlook for all the ratings is stable.

The shelf offering allows Montpelier to periodically sell debt securities, common stock, preferred stock and other securities with net proceeds to be used for working capital, capital expenditures, acquisitions and other general corporate purposes. A.M. Best anticipates that any issuance under the registration will be used judiciously to support additional growth and financial flexibility. Following any debt issues, Montpelier’s debt to adjusted capital is expected to remain in the mid-20 percent range with fixed charge coverage sustained in the high single digit range.

Through the first nine months of 2003, Montpelier produced a combined ratio of 48 percent, while benefiting from higher market rates, light catastrophes and an unencumbered balance sheet. The company has continued to adhere to its original business plan, focusing on short-tail property business at higher attachment points. Business is diversified by line and geographically and includes property risk excess of loss, property pro-rata, property catastrophe excess of loss and qualifying quota share business with select Lloyd’s syndicates.

Furthermore, Montpelier’s strategy of operating with a relatively small staff from a Bermuda-only platform continues to be a key driver for its relatively low expense infrastructure.

Partially offsetting these strengths are the greater operating risks associated with a start-up entity and the recent increased availability of capacity to the property market, which is resulting in a leveling off of rates that could dampen expected returns. A.M. Best will continue to closely monitor Montpelier’s operations and performance.

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