Best Affirms Platinum Underwriters ‘A’ Ratings; Outlook Stable

March 28, 2012

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Platinum Underwriters Bermuda, Ltd. and its strategic affiliate, Baltimore-based Platinum Underwriters Reinsurance, Inc.

Best also affirmed the ICR of “bbb” of Platinum Underwriters Holdings, Ltd. (Bermuda) and the debt ratings of Delaware-based Platinum and Platinum Underwriters Finance, Inc.

The outlook for all of the ratings is stable.

The ratings reflect the group’s “excellent risk-adjusted capitalization, solid long-term track record, focused business strategy, which strictly emphasizes cycle management, and overall enterprise risk management capabilities,” Best explained. “The ratings also consider the organization’s stable management team and low financial leverage.”

Best noted that in 2011 “Platinum experienced significant catastrophe losses, which resulted in a sizeable net operating loss. However, when adjusted for capital management activities, the decline in shareholders’ equity was nominal, leaving Platinum with strong risk-adjusted capitalization to execute its strategy.”

Best added that, given the magnitude of industry losses in 2011, “a slight erosion of capital at Platinum’s rating level” is within its expectations “and is not outsized relative to peers. Platinum benefited from significant unrealized gains in 2011, which was a result of its ‘barbell’ investment strategy.”

Best said it had also “considered Platinum’s total enterprise risk management across the various spectrums of risk, its business strategy and the organization’s ability to generate strong prospective returns.

As a partial offsetting factor, Best noted its “concerns that Platinum’s resolute cycle management strategy may someday hinder the company’s ability to access quality business. While it is still early to fully evaluate the impact of such a strategy,”

Best said it would “continue to monitor the organization’s business profile and position in the marketplace with regard to significant rating considerations.

“Factors that could lead to a downgrading of Platinum’s ratings or a revision of the outlook to negative include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to expectations and peers, significant adverse loss reserve development and/or a material decline in risk-adjusted capital.

“Alternatively, factors that could lead to an upgrading of the company’s ratings include sustained, long-term favorable operating profitability, coupled with maintenance of strong risk-adjusted capital levels.”

Best summarized the companies affected by the debt rating actions as follows:
The following debt ratings have been affirmed:
Platinum Underwriters Finance, Inc.—(guaranteed by Platinum Underwriters Holdings, Ltd.)
— “bbb” on $250 million 7.50 percent senior unsecured notes, due 2017

The following indicative ratings available under the shelf registration have been affirmed:
Platinum Underwriters Holdings, Ltd.—
— “bbb” on senior unsecured debt
— “bbb-” on subordinated debt
— “bb+” on preferred stock

Source: A.M. Best

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