Best Upgrades Alterra Capital and Subs Ratings to ‘A’

May 13, 2010

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A’ (Excellent) from ‘A-‘ (Excellent) and issuer credit ratings (ICR) to “a” from “a-” of the operating subsidiaries of Alterra Capital Holdings Limited (formerly known as Max Capital Group Ltd.), following its recent merger with Harbor Point Limited [See IJ web site – . The companies were former subsidiaries of Max Capital.

Best also upgraded the ICR to “bbb” from “bbb-” of Alterra as well as all of its debt ratings, and has removed all of the above ratings from under review with positive implications and assigned a stable outlook.

In addition Best affirmed the FSR of ‘A’ (Excellent) and ICRs of “a” of the subsidiaries of the former Harbor Point Limited. The outlook for these ratings is stable. Alterra is domiciled in Hamilton, Bermuda.

Best also noted that Alterra has commenced the necessary processes to change the names of its operating subsidiaries. Until these processes are completed, the operating subsidiaries will continue to do business under their existing Max Capital Group Ltd. or Harbor Point Limited name, as applicable.

“The rating actions reflect the prospective benefits to Alterra in terms of broadening its management depth, the addition of strong underwriting teams, enhanced diversification, increased capacity and greater scale of operations,” Best explained. “The risk-adjusted capital of the combined organization is strong after considering the proposed post closing extraordinary dividend of approximately $300 million. Moreover, the organizational structure of the Board of Directors, the executive management team and key committees provides comfort that Alterra will be well positioned to execute its strategy.”

However, the report also pointed out that, even though “the Alterra merger appears to have been structured in an optimal manner, there is execution risk inherent in a transaction of this nature.”

As partially offsetting factors, Best cited the “current headwinds in the casualty market and the threat of looming inflation, which could take its toll on casualty writers, including Alterra, in the intermediate and longer term.”

Best summarized its ratings actions as follows:
The FSR has been upgraded to ‘A’ (Excellent) from A- (Excellent) and the ICRs to “a” from “a-” for the following operating subsidiaries of Alterra Capital Holdings Limited:
— Alterra Insurance Limited (formerly Max Bermuda Ltd.)
— Alterra Reinsurance Europe Limited (formerly Max Re Europe Limited)
— Alterra Insurance Europe Limited (formerly Max Insurance Europe Limited)
— Alterra America Insurance Company (formerly Max America Insurance
— Alterra Specialty Insurance Company (formerly Max Specialty Insurance

The ICR has been upgraded to “bbb” from “bbb-” for Alterra Capital Holdings Limited.

The following debt rating has upgraded: Alterra USA Holdings Limited (formerly Max USA Holdings Ltd.) (guaranteed by Alterra Capital Holdings Limited)— –to “bbb” from “bbb-” on $100 million 7.2 percent senior secured notes, due 2017

The following indicative ratings under the current shelf registration have been upgraded:

Alterra Capital Holdings Limited: –to “bbb” from “bbb-” on senior unsecured debt –to “bbb-” from “bb+” on subordinated debt –to “bb+” from “bb” preferred stock

Alterra USA Holdings Limited (guaranteed by Alterra Capital Holdings Limited)— –to “bbb” from “bbb-” on senior secured debt –to “bbb-” from “bb+” on subordinated debt

Alterra Capital Trust (formerly Max Capital Trust I) (guaranteed by Alterra Capital Holdings Limited)— –to “bb+” from “bb” on preferred securities

The ICR of “bbb” has been withdrawn and assigned an “nr” for Harbor Point Limited.

The FSR of A (Excellent) and ICRs of “a” have been affirmed for Alterra Reinsurance Limited (formerly Harbor Point Re Limited) and its operating subsidiary, Alterra Reinsurance USA Inc. (formerly Harbor Point Reinsurance U.S., Inc.).

Source: A.M. Best

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