Best Affirms Montpelier Re and Subsidiaries Ratings

March 18, 2009

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Bermuda-based Montpelier Reinsurance Ltd. and Montpelier US Insurance Company (MUSIC), which is based in Oklahoma City. Best also affirmed the ICR of “bbb-” and all debt ratings of Montpelier Re Holdings Ltd.
The outlook for all of the ratings is stable.

“These rating actions reflect Montpelier’s excellent risk-adjusted capitalization, adequate operating performance and enhanced risk management framework,” said Best. “Partially offsetting these strengths is Montpelier’s susceptibility to high severity losses, which is inherent in a global property catastrophe reinsurer. Additionally, these strengths are tempered by the start-up nature of the affiliated U.S. and U.K. operating platforms.”

Best also explained that the stable outlook “reflects the expectation that Montpelier Re’s future performance should benefit from the current operating environment in its property focused book of business and the newer operating platforms will begin to be accretive to overall returns.

“Montpelier Re produced solid returns in 2006 and 2007, which enabled its balance sheet to withstand the challenges faced during 2008. While 2008 resulted in negative return measures due in part to sizable realized and unrealized investment losses, the company’s risk management and strength of its balance sheet kept the impact of these challenges to a controllable level.

“Furthermore, risk management initiatives implemented in recent years to help contain Montpelier Re’s risk profile have proven to be effective as evidenced by the manageable level of incurred losses from the Atlantic hurricanes during 2008.

“Montpelier Re’s current financial leverage measures remain in line with its rating levels, with debt and preferred-to-total equity at approximately 20 percent.

Best gave the following details on the ratings:
The FSR of ‘A- ‘(Excellent) and ICRs of “a-” have been affirmed for Montpelier Reinsurance Ltd. and Montpelier US Insurance Company.
The ICR of “bbb-“has been affirmed for Montpelier Re Holdings Ltd.

The following debt rating has been affirmed:
Montpelier Re Holdings Ltd.—
— “bbb-” on $250 million 6.125 percent senior unsecured notes, due 2013

The following indicative ratings have been affirmed under the shelf
Montpelier Re Holdings Ltd.—
— “bbb-” on senior unsecured debt
— “bb+” on subordinated debt
— “bb” on preferred stock

Source: A.M. Best –

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