A.M. Best Co. announced that it has upgraded the financial strength rating to A (Excellent) from A- (Excellent) of Bermuda-based Montpelier Reinsurance Ltd. with a stable outlook. White Mountains Insurance Group and international broker Benfield originally formed the company after Sept. 11.
“This action reflects the company’s superior operating results in its first year of operation, which stem from the development and successful implementation of strict underwriting and risk management controls and development of a strong broker distribution network. Additionally, Montpelier maintains excellent capitalization with almost $1.4 billion of shareholders equity at March 31, 2003, and has a highly experienced management team,” said Best.
“Montpelier produced a combined ratio of 67% in 2002 while benefiting from higher market rates, light catastrophes and an unencumbered balance sheet. The company’s strategy of operating with a relatively small staff from a Bermuda only platform was successful in its first year, as Montpelier developed strong underwriting and financial controls along with a lower expense environment,” it continued.
Best also noted that Montpelier’s IPO last October raised $201 million through the sale of 11 million shares. “The company has adhered to its original business plan focusing on short-tail property business at higher attachment points. Business is diversified by line and geographically and includes: property risk excess of loss, property pro-rata, property catastrophe excess of loss and qualifying quota share business with select Lloyd’s syndicates,” said the announcement.
“Partially offsetting these strengths is potential market pressure on pricing, which could dampen expected returns, and exposure to low frequency high severity property catastrophe losses” Best indicated. The rating agency said it would “continue to closely monitor Montpelier’s operations and performance.”
Montpelier Re’s President and CEO Anthony Taylor issued the following statement commenting on the ratings upgrade: “We are very pleased with the decision by A.M. Best to upgrade our rating. We believe that this decision is further evidence of the substantial financial strength at Montpelier Re, and recognizes our strong capitalization, experienced management team and disciplined underwriting approach.”
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