Ratings Roundup: Panther Re, Travelers (Canada), Montpelier Re

May 12, 2008

Standard & Poor’s Ratings Services has withdrawn its ‘BBB+’ counterparty credit rating on Panther Re Bermuda Ltd.’s senior secured Term A loan and its ‘BB+’ rating on Panther Re’s subordinated Term B loan at the issuer’s request. “The rating withdrawal follows early repayment of the obligations in full, which in turn follows the early termination of the reinsurance agreement between Panther Re and Hiscox-Syndicate 0033,” S&P explained. “The early termination of this agreement reflects changes in the prevailing market conditions for property catastrophe excess-of-loss reinsurance.”

A.M. Best Co. has assigned an issuer credit rating (ICR) of “a+” and affirmed the financial strength rating (FSR) of ‘A’ (Excellent) of Travelers Guarantee Company of Canada, and has assigned a stable outlook to both the ICR and FSR. “The ratings and outlook of Travelers Guarantee Company of Canada reflect its strong capitalization, improved operating performance, excellent brand recognition and solid business profile as a specialty lines writer in the surety segment,” said Best. “These positive rating factors are derived from the company’s favorable underwriting results and steady stream of investment income. Pre-tax operating returns on revenue and equity have increased, underwriting leverage measures have declined and overall risk-adjusted capitalization has improved. The improvement in underwriting performance is a result of a well executed plan by management, which includes the discontinuation of poor performing lines of business, enhanced technology capabilities and more conservative account management. The company’s surety business also has benefited from current favorable economic conditions in Canada that have fueled construction projects and contributed to the company’s improved operating performance. Furthermore, a series of well-timed amalgamations over the last few years has served to increase the invested asset base of the company. More recently, a deliberate name change has allowed the Travelers Guarantee Company of Canada to capitalize on brand recognition and acknowledge the affiliation and synergies shared with its U.S. parent, Travelers Casualty and Surety Company.

Standard & Poor’s Ratings Services has revised its outlook on Montpelier Re Holdings Ltd. and its core subsidiary, Montpelier Reinsurance Ltd., to stable from negative. S&P also affirmed its ‘BBB’ counterparty credit rating on Montpelier Re Holdings Ltd. and its ‘A-‘ counterparty credit and financial strength ratings on Montpelier Reinsurance Ltd. “The revised outlook reflects the companies’ meaningful improvements in enterprise risk management over the past two years,” noted S&P credit analyst Taoufik Gharib. “It is also based on management’s reduction of the group’s risk exposure to a single event after Hurricanes Katrina, Rita, and Wilma in 2005, which revealed a higher risk profile than expected.” Montpelier materially reduced its gross limits and purchased more reinsurance. The company also reduced its property catastrophe retrocessional business and discontinued its offshore marine business. Current net exposures have been reduced and are expected to stay within Montpelier’s risk tolerance.

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