Fitch Ratings reiterated Insurer Financial Strength ("IFS") at
'A-' of Montpelier Reinsurance Ltd., the main insurance operating
Montpelier Re Holdings Ltd
The rating agency also reiterated the Issuer Default Rating ("IDR")
at 'BBB+' of Montpelier.
The outlook remains positive.
The rating affirmations came on the back of Montpelier's sustained
strong operational results and internal capital generation over a
long span of time. It also takes into account its exposure to
earnings and capital instability stemming from property catastrophe
reinsurance products. However, Fitch noted that the company is
positioned to prudently manage its exposure to catastrophe related
Fitch also noted that the company's low underwriting and asset
leverage has helped it to preserve capital even during the trying
times of instable capital market and poor underwriting results.
Also, the company's investment portfolio consists of superior fixed
income investments which performed well even amidst instable
markets. Furthermore, chances of adverse loss development from
short-tail underwriting liabilities are unlikely.
The outlook accounts for Montpelier's strong long-term operational
performances as well as potential benefits arising from pricing
improvement in the catastrophe and other short tail specialty
reinsurance lines of businesses. Also, the rating reflects
Montpelier's improving operating profile that involves less
instability compared to its peers.
The rating agency might consider a rating upgrade if Montpelier
continues to deliver solid results in 2012 on the heels of better
underwriting performances and combined ratio returns to historical
levels. Also, Montpelier's Lloyd's Syndicate 5151 should contribute
considerably. This would further reinstate the diversification from
specialty (re)insurance lines aiding operating profit stability
The rating would be subject to downgrade if risk-adjusted capital
erodes, operating leverage ratios with underwriting leverage
(traditional premiums written to equity ratios) increases to 1.0x
or above, or suffers huge catastrophe loss.
We believe, the company's strong ratings scores will help retain
investor confidence and help it to write more businesses going
forward, thereby augmenting the results.
We retain our Outperform recommendation on Montpelier. The
quantitative Zacks #1 Rank (short term Strong Buy rating) for the
company indicates a boost on the stock over the near term.
Montpelier competes with
Flagstone Reinsurance Holdings SA
RenaissanceRe Holdings Ltd.
Validus Holdings Ltd.
FLAGSTONE REINS (FSR): Free Stock Analysis
MONTPELIER RE (MRH): Free Stock Analysis Report
RENAISSANCERE (RNR): Free Stock Analysis Report
VALIDUS HOLDING (VR): Free Stock Analysis
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