S&P Places IPC Holdings and Related Ratings on CreditWatch/Negative

June 17, 2009

Standard & Poor’s Ratings Services has placed its ‘BBB’ counterparty credit rating on Bermuda-based IPC Holdings Ltd. on CreditWatch with negative implications. S&P also placed its ‘A-‘ counterparty credit and financial strength ratings on IPCRe Ltd. and its ‘A-‘ financial strength rating on IPCRe Europe Ltd. – IPC’s main operating subsidiaries – on CreditWatch negative.

“We placed the ratings on CreditWatch negative to reflect the uncertainty surrounding IPC’s senior management and corporate strategy,” explained credit analyst Taoufik Gharib. S&P noted that “IPC’s board of directors is contemplating a range of strategic alternatives, including selling the company, following the recent rejection by IPC’s shareholders of the proposed merger with Max Capital Group Ltd. (See previous article). As part of this review, the board of directors is considering an offer from Validus Holdings Ltd.; the two companies have already entered into a confidentiality agreement to perform due diligence.”

S&P explained that, “while the board of directors is reviewing various options, IPC’s senior management team is undergoing change. A committee of the board of directors, appointed in October 2008, will continue the search for a replacement CEO. This search had been placed on hold while the proposed merger with Max Capital was being pursued.

“With the possibility of a new corporate strategy, including the potential for new ownership and a changing senior management team, IPC is entering hurricane season with many uncertainties, which raises our concern.”

In addition S&P noted that “senior management and the board are spending a significant amount of time and resources reviewing and analyzing various strategic alternatives. IPC remains profitable generating strong underwriting results in first quarter of 2009 (including merger-related expenses), but we are concerned about the company’s unclear focus.”

Gharib added: “We will continue to monitor any developments. We expect to resolve the CreditWatch status of the ratings within the next three months, contingent on the company’s future actions and initiatives regarding its corporate strategy and senior management team.”

During this time, if the company suffers a significant catastrophe loss and becomes an outlier relative to its peers, we could lower the rating given the lack of a clear strategic vision.

Source: Standard & Poor’s – www.standardandpoors.com

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