S&P Says Montpelier Re Dividend Program To Have No Effect on Ratings

Standard & Poor’s Ratings Services has issued a statement indicating that the recent decision by Bermuda-based Montpelier Re Holdings (MRH) that it will begin a dividend-paying program of $24 million per quarter (See IJ Website Nov. 26) will not affect its ratings, currently ‘BBB,’ or those of its operating subsidiary, Montpelier Reinsurance Ltd., currently ‘A-.’ The outlook on both entities is “stable.”

“The companies’ capitalization is viewed as very strong,” said S&P, “with a capital adequacy ratio of 200 percent expected for year-end 2003; this includes an additional charge for property catastrophe exposure. The company’s capital base of roughly $1.8 billion as of Sept. 30, 2003, supports the rating by establishing Montpelier’s market presence and mitigating some concerns about the company’s status as a new operation.” S&P does not expect “capital adequacy to decline as the company increases its exposure-related charges, but capital adequacy will remain very strong.”

S&P said it based the stable outlook “on the hard market and adequate rates that Montpelier is realizing for its short-tail property lines. Adequate rates are expected to support Montpelier’s business position within the property reinsurance sector through 2004. The combined ratio is expected to remain less than 80 percent in 2003 and 2004 (excluding any significant catastrophe events), while capital adequacy is expected to remain above 160 percent (‘AA’ category) through 2004.