S&P Rates Max Capital’s Operating Companies ‘A-‘; Outlook Stable

August 26, 2009

Standard & Poor’s Ratings Services has assigned its ‘A-‘ counterparty credit and financial strength ratings on Max Capital Group Ltd.’s operating insurance and reinsurance companies. S&P also raised its counterparty credit rating on Max Capital Group Ltd. to ‘BBB’ from ‘BBB-‘. The outlook on both of the ratings is stable.

“The rating actions on Max Capital Group Ltd. and its operating insurance and reinsurance companies reflect their strong underwriting and operating performance, with a five-year average combined ratio of 93.3 percent and a standard deviation of 7.7 percent; strong competitive position as a diversified specialty insurance and reinsurance company; and strong enterprise risk management,” explained credit analyst Damien Magarelli.

S&P also noted that Max Capital’s new management team, in place for around three years, “has been focused on developing Max Capital into a specialty provider, and this strategy has significantly improved the company’s operating platforms’ breadth and brand name in the market.”

However, S&P also indicated that Max Capital’s “limited equity scale is a weakness because it limits the company’s access to certain customer segments and markets.” In addition the company, like many others who have a similar profile, is affected by the current pricing cycle in P/C insurance and reinsurance, which has offered only limited rate increases overall. In addition S&P indicated that, Max Capital, much like its peers, “has limited ability to raise capital amid the current financial market conditions. However, this is not a significant risk because Max Capital has low financial leverage and strong capitalization.”

The company’s competitive position has been enhanced by greater operational diversification with platforms in the U.S. and Europe (including the U.K.), leading to greater distribution strengths and client access.

Max capital has focused increasingly on areas in the market where it can achieve an underwriting competitive advantage, and this has led to its growth and specialization in certain product areas.

S&P described the Company’s operating performance as “strong and less volatile than that of some peers with a purposely lower catastrophe risk component. Changes in Max Capital’s investment allocation have resulted in transforming the company from one that was known for its hedge fund allocation, to a company focused on specialty product offerings with a dramatically lower hedge fund allocation in line with some of its peers.”

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

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