Ratings Recap: Stoneheath Re, JRG Re

January 29, 2008

A.M. Best Co. has downgraded the debt rating to “bb+” from “bbb” on the $350 million non-cumulative perpetual preferred securities (issuer preferred securities) issued by Stoneheath Re (issuer), a Cayman Islands exempted company. The rating outlook is stable. Best explained: “The issuer is licensed as a restricted Class B reinsurer under the laws of the Cayman Islands and was formed to provide multi-year reinsurance capacity to certain insurance and reinsurance subsidiaries (ceding insurers) of XL Capital Ltd. (XL Capital) (Cayman Islands). The terms of the reinsurance agreement between Stoneheath Re and XL Capital provide that upon a payment by the issuer to the ceding insurers under the reinsurance agreement, XL Capital will issue and deliver to the issuer Series D preference ordinary shares of XL Capital (XL preferred securities) in an amount equal to the payment made by the issuer. Cash from the issuance of preferred securities by Stoneheath Re, which previously had been deposited into a trust account and subsequently disbursed as claim payments, will be replaced by the XL preferred securities.”

A.M. Best Co. has assigned a financial strength rating (FSR) of A- (Excellent) and an issuer credit rating (ICR) of “a-” to Bermuda-based JRG Reinsurance Company, Ltd. with stable outlook. “These initial ratings follow the recent formation of JRG Re, its successful capital raising of $250 million and its lead role within Franklin Holdings (Bermuda), Ltd.,” a privately held Bermuda based parent company that acquired the No. Carolina-based James River Group, Inc. in December. Franklin is under the management direction of James River’ s former management. “Majority ownership is held by an investor group composed of the D.E. Shaw Group; The Goldman Sachs Group, Inc; Sunlight Capital, a private equity-oriented affiliate of Elliott Associates, L.P. and Lehman Brothers.”

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