S&P Revises Outlook on Montpelier Re to Positive

February 24, 2005

Standard & Poor’s Ratings Services announced that it has revised its outlook on Montpelier Reinsurance Ltd. and Montpelier Re Holdings Ltd. (MRH) to positive from stable. “The outlook was revised to reflect our increased confidence level that Montpelier has made strides in establishing a track record as a successful property catastrophe reinsurance company since its inception of writings in 2002,” stated S&P credit analyst Steven Ader.

S&P also affirmed its ‘A-‘ counterparty credit and financial strength ratings on Montpelier and its ‘BBB’ counterparty credit rating on MRH.

“This success is demonstrated in Montpelier’s operating performance in 2004, its first significantly impacted catastrophe loss year, and most recently in the January 2005 renewals,” said the bulletin. “The ratings on Montpelier reflect its market position and scale within the Bermuda reinsurance market, strong operating performance, and strong financial flexibility. The company’s capital adequacy is also viewed as a strength to the rating.”

As offsetting factors S&P noted “Montpelier’s limited track record, concentrated management team, and high risk for catastrophe losses.”

The newly accorded positive outlook is “based on the view that Montpelier is expected to maintain strong earnings relative to its peers and capital in excess of that required for the rating,” said S&P. “In addition, Montpelier is expected to continue its underwriting discipline as the property market continues to soften. Any consideration of an upgrade will be based on a further continuation of Montpelier’s performance as posted since its inception in 2001.

“Montpelier’s competitive position is viewed as strong based on its market position and scale. Montpelier ranks as a Top 10 (based on total equity) reinsurer within the Bermuda reinsurance market. Montpelier’s market position is also supported by its competitive advantage in not having to cope with legacy issues related to balance-sheet integrity.”

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