A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Bermuda-based Montpelier Reinsurance Ltd. and its wholly owned subsidiary, Montpelier US Insurance Company (MUSIC), which is based in Oklahoma City.
Best also revised the outlook to positive from stable and affirmed the ICR of “bbb-” and all existing debt ratings of the parent company, Montpelier Re Holdings Ltd.
The ratings for Montpelier reflect its “excellent risk-adjusted capitalization, solid operating performance, diversified business profile and good competitive position,” said Best. “These positive characteristics are the result of an experienced management team and robust enterprise risk management framework.”
As partial offsetting factors Best cited Montpelier’s “susceptibility to low frequency, high severity losses as a global property catastrophe focused reinsurer. Additionally, the group’s strengths are somewhat challenged by the start-up nature of its affiliated U.S. operating platform.”
Best explained that the positive outlook reflects Montpelier’s “overall financial flexibility, with access to either equity or debt markets, adequate rate environment in the company’s targeted lines of business and the continued development of its newer operating platforms.”
In addition Best noted that while the group’s premium volume is “still concentrated in catastrophe exposed property lines of business, MUSIC and its U.K. affiliate, Lloyd’s Syndicate 5151, provide diversification to Montpelier’s business mix, geographic exposure and distribution capabilities.
“Montpelier continues to follow a prudent underwriting strategy to limit the potential accumulation of losses from a single large catastrophic event. Montpelier manages its business within certain constraints relating to aggregate policy limits, net exposure to a tail type modeled underwriting loss and a comprehensive operating loss. Montpelier’s management monitors these underwriting constraints relative to capital based limits established by its board of directors and diversifies the company’s exposure around the world to achieve a desired optimal spread of risk.”
Best summarized the ratings affected by its actions as follows:
Montpelier Re Holdings Ltd.—
— “bbb-” on $250 million 6.125 percent senior unsecured notes, due 2013
— “bb” on $150 million 8.875 percent fixed rate perpetual non-cumulative preferred shares
The following indicative ratings have been affirmed under the shelf registration:
Montpelier Re Holdings Ltd.—
— “bbb-” on senior unsecured debt
— “bb+” on subordinated debt
— “bb” on preferred stock
Source: A.M. Best
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