Best Removes Flagstone Re from Review; Affirms Ratings

December 21, 2012

A.M. Best Co. has removed from under review with developing implications and affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Flagstone Reassurance Suisse S.A., based in Martigny, Switzerland, and Flagstone Alliance Insurance and Reinsurance PLC, based in Limassol, Cyprus, together known as Flagstone Re.

The outlook assigned to all of these ratings is stable.

Best has also withdrawn the ICR of “bbb-” of Luxembourg-based Flagstone Reinsurance Holdings S.A., due to “its change in status to an intermediate holding company of Validus Holdings, Ltd.” Best concurrently withdrew, the indicative ratings of “bb” on preferred stock, “bb+” on subordinated debt and “bbb-” on senior debt of Flagstone Holdings “as the securities available under its shelf registration are no longer in existence.”

Best said the ratings reflect Flagstone Re’s “excellent level of risk-based capitalization on a stand-alone basis, as well as the commitment and experience of the management team at Validus Reinsurance Ltd. in the successful and orderly integration of the acquired business operations.

“The ratings also recognize the significant remedial actions taken by the former management of Flagstone to streamline the organizational structure, de-risk the balance sheet and significantly reduce overall expenses.”

Best explained that the stable outlook reflects its opinion that “Flagstone Re’s policyholders are in a more secure position following the change in ownership to Validus Re. Validus Re has displayed an historically strong operating performance, capitalization and a strong enterprise risk management program, which will inure to the benefit of Flagstone Re’s policyholders. Financial forecasts indicate a continuation of strong risk-adjusted capital levels, which are further enhanced by the support provided by Validus Re.

“Given the current position of Flagstone Re as an inactive underwriter, it is unlikely that the ratings will be upgraded. Rating factors that could lead to a negative outlook would be the result of any negative changes in Validus Re’s ratings,” Best’s report concluded.

Source: A.M. Best.

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