A.M. Best Co. raised the issuer credit rating ("ICR") to 'bbb'
from 'bbb-' along with the debt ratings of
Montpelier Re Holdings Ltd.
). Concurrently, the credit rating agency upgraded the financial
strength rating ("FSR") to A (Excellent) from A- (Excellent) and
ICR to 'a' from 'a-' of Montpelier Reinsurance Ltd., the company's
wholly owned operating subsidiary.
The outlook for all ratings has been revised to stable from
The rating upgrade came on the back of Montpelier's superior
risk-adjusted capitalization, strong operational performances,
broadened product offerings as well as its dominant position.
However, the company's exposure to catastrophe losses somewhat
dwarfs the positives.
Though Montpelier remains a property-catastrophe focused
reinsurer, the Lloyd's platform and syndicate 5151 offers business
mix, geographic spread and distribution capabilities
diversification for the company's business. Also, the company's
prudent underwriting practices has assisted them to limit the
losses that they might possibly incur from a single catastrophic
A.M. Best expects Montpelier's financial leverage to be around
25% or below with fixed charge coverage in the low double-digit
The outlook revision accounts for the company's financial
flexibility, capital markets accessibility and current rate
environment in its targeted lines of business.
Nevertheless, if Montpelier continues to maintain solid
risk-adjusted capital levels and delivers solid operating
profitability relative to its peers, A.M. Best might consider
outlook upgrades or rating upgrades.
On the contrary, outlook and ratings might be subject to a
downside revision if Montpelier incurs sizable catastrophe or
investment losses, operating profitability deteriorates, and
risk-adjusted capital levels declines.
Recently, another credit rating agency, Fitch Ratings reiterated
Issuer Default Rating (IDR) at 'A' of
RenaissanceRe Holdings Ltd.
). Concurrently the rating agency also reiterated Insurer Financial
Strength (IFS) rating at 'A+' of Renaissance Reinsurance Ltd., the
company's subsidiary. The outlook of the ratings is stable.
We believe, the company's strong ratings scores will help retain
investor confidence and augment its business going forward.
We retain our Outperform recommendation on Montpelier Re
Holdings Ltd. The quantitative Zacks #2 Rank (short term Buy
rating) for the company indicates slight boost on the stock over
the near term.
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