S&P Says Montpelier Re’s Lower Premium Estimates Won’t Affect Ratings

October 30, 2003

Commenting on Montpelier Re Holdings Ltd.’s earnings announcement, Standard & Poor’s Ratings Services indicated that the lowered premium income expectations for 2003 would not have an adverse affect on the company’s ratings.

In the bulletin issued yesterday the holding company noted that the gross premiums written in 2003 of its operating subsidiary, Montpelier Reinsurance Ltd., which had been had been expected to measure roughly $900 to $925 million, will likely be 10% lower. (See IJ Website Oct. 29) It also said that qualifying quota share (QQS) premiums, which were expected to total roughly $160 million at year-end 2003, would instead be about $60 million, and that “a decrease in reinstatement premiums is also contributing modestly to the decline in writings.”

S&P stated that “These revised expectations will not have an affect on Standard & Poor’s ratings on Montpelier.”

The rating agency’s announcement indicated that it “had expected that Montpelier would decrease its opportunistic writings of QQS business to almost nothing by 2004. In addition, the contribution from the other specialty lines was expected to increase to nearly 25% of total gross premiums by 2004 (including a maximum of 10% from casualty lines).”

It added that “the stable outlook on Montpelier is based 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. It is the hard market that has afforded Montpelier the ability to maintain strong earnings and the stable outlook despite its decrease in QQS writings.

“If Montpelier expands too aggressively into other lines and earnings deviate from expectations,” S&P said it would then review ithe company’s ratings.”

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