Best Revises Alterra, Operating Subs Outlook to Negative; Affirms Ratings

A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Alterra Bermuda Limited) and its affiliated operating companies.

Best also revised its outlook to negative from stable and affirmed the ICR of “bbb” of Alterra Bermuda’s parent company, Alterra Capital Holdings Limited, as well as all of the debt ratings of Alterra, Alterra USA Holdings Limited, Alterra Finance, LLC (both domiciled in Delaware) and Alterra Capital Trust I. All the above named companies are domiciled in Bermuda, unless otherwise specified.

Best explained that it had revised the outlook after the announcement of the departure of John Berger from the organization’s executive management level and Board of Directors.

Best noted that the “change has taken place less than a year and a half after Alterra’s formation, which was the result of the merger between Max Capital Group Ltd. and Harbor Point Limited.”

As a result, Best described Berger’s departure as constituting “a material change in the management structure,” which, Best said, it had considered at the time of the merger. Best explained that when it had assigned the ratings to the merged companies and their operating subsidiaries in May 2010, it had given “significant consideration to the organizational structure of the Board of Directors, the executive management team and the key committees that were established to help steer and execute the strategy of the company.”

Best added that it “still views these elements to be critical to the organization and will continue to monitor the development of the company and its operational strategy. The “recent change in management has introduced a new level of uncertainty to the organization in terms of execution and development of future business strategies and retention of other key personnel. However, Best also noted that “currently Alterra has a deep bench of talent to draw upon to help lead the organization over the near term.”

Best summarized the ratings affected by the announcement as follows:
The FSR of A (Excellent) and ICR of “a” have been affirmed for Alterra Bermuda Limited and its following operating subsidiaries:
Alterra Reinsurance Europe plc
Alterra Europe plc
Alterra America Insurance Company
Alterra Excess and Surplus Insurance Company
Alterra Reinsurance USA Inc.

The following debt ratings have been affirmed:
Alterra USA Holdings Limited (guaranteed by Alterra Capital Holdings Limited)—
–“bbb” on $100 million 7.2 percent senior secured notes, due 2017
Alterra Finance, LLC (guaranteed by Alterra Capital Holdings Limited) —
–“bbb” on $350 million 6.25 percent senior unsecured notes, due 2020

The following indicative ratings under the current shelf registration have been affirmed:
Alterra Capital Holdings Limited—
–“bbb” on senior unsecured debt
–“bbb-” on subordinated debt
–“bb+” on preferred stock
Alterra USA Holdings Limited (guaranteed by Alterra Capital Holdings Limited)—
–“bbb” on senior secured debt
–“bbb-” on subordinated debt
Alterra Capital Trust I (guaranteed by Alterra Capital Holdings Limited)—
–“bb+” on preferred securities

Source: A.M. Best

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