S&P Raises Platinum Holdings Ratings to ‘BBB+’; Insurance Subs Rated ‘A’

December 21, 2009

Standard & Poor’s Ratings Services has raised its counterparty credit rating on Platinum Underwriting Holdings Ltd. to ‘BBB+’ from ‘BBB’. S&P also assigned its ‘A’ counterparty credit and financial strength ratings to Platinum’s insurance subsidiaries: Platinum Underwriters Reinsurance Inc. and Platinum Underwriters Bermuda Ltd.

The outlook on all of these entities is stable.

“The upgrade on the holding-company credit rating primarily reflects our opinion of Platinum’s very strong cycle management,” explained credit analyst Tracy Dolin. “Strong enterprise risk management and the company’s highly skilled and experienced underwriting and actuarial staff should help sustain its track record of strong earnings and capitalization.”

S&P also observed that the Company’s strategy “of shifting its diversified product mix opportunistically based on rate adequacy should help somewhat mitigate its exposure to pricing pressures because of its focus on large accounts.”

However, “Platinum’s somewhat high concentration of business in terms of geographic spread and distribution,” is an offsetting factor. “In addition, given that a significant proportion of Platinum’s reserves are for its casualty lines, the company is susceptible to small-to-moderate reserve-strengthening needs (although we expect nothing sizeable in the near term) if prior-year adverse development, unfavorable loss trends, or inflationary concerns were to arise.”

Concerning the stable outlook on the ratings, S&P said it “believes “Platinum will continue to maintain its underwriting discipline in the face of competitive market conditions. Accordingly, we anticipate that its premiums will decline by low double digits as property/casualty insurance rates soften, a product of cedants’ increased capacity. In addition, reinsurance demand should remain flat, yet insurable exposures will continue to decline in tandem with adverse economic conditions. Lastly, U.S. casualty rates remain inadequate relative to loss-cost trends.

“We expect that Platinum’s business profile will remain at about a 60 percent/40 percent split between property and casualty through the remainder of 2009 and into 2010. The company will likely continue to de-emphasize its finite-risk segment until there is clarification regarding regulatory and accounting rules. We believe Platinum’s profile will remain small and volatile given the company’s focus on large accounts and its reinsurance-only platform.”

S&P also indicated that “Platinum’s operating performance should remain strong for the remainder of 2009 and 2010, assuming normal catastrophe levels during this period. For 2010, we expect that its operating performance will deteriorate somewhat as the company maintains its underwriting discipline through the softening rate cycle.

“We expect that Platinum’s capitalization will remain very strong, supported by strong earnings. Platinum will likely manage capital efficiently, chiefly to take advantage of profitable underwriting opportunities. Otherwise, the company probably will revert to repurchasing shares.”

Dolin added that a “downgrade is unlikely because of Platinum’s very strong cycle management, strong ERM, and strong capital base. Additional favorable rating actions are also unlikely because of the company’s static competitive position relative to peers.”

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

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