A.M. Best Upgrades For Validus

February 6, 2012 | 0 Comments

A.M. Best Co. today [Feb.6] upgraded the financial strength rating [FSR] to A [Excellent] from A- [Excellent] and issuer credit rating [ICR] to “a” from “a-” of Bermuda’s Validus Reinsurance, Ltd.

Additionally, A.M. Best has upgraded the ICR to “bbb” from “bbb-”and debt ratings of the parent company, Validus Holdings, Ltd. The outlook for all ratings has been revised to stable from positive.

Analysts at the ratings agency said the upgrades reflect Validus Re’s solid risk-adjusted capitalization, favourable operating performance since inception, experienced management team, excellent enterprise risk management programme and prudent operating strategies.

“Further supporting these ratings is the support of Validus Holdings, which provides financial flexibility as a publicly traded company on the New York Stock Exchange,” the international ratings agency said in a statement.

Partially offsetting these strengths is Validus Re’s susceptibility to low frequency, high severity events as a property catastrophe focused reinsurer.

“However, the company’s risk-adjusted capital remains at levels that have been stress tested to absorb significant catastrophe losses, thus, mitigating this concern,” said A.M. Best.

The stable outlook is reflective of A.M. Best’s expectation that the group will continue to produce favorable long-term operating results and maintain excellent risk-adjusted capitalization, which is supportive of its current rating level.

A.M. Best noted that since its formation in Bermuda in 2005, Validus Holdings has grown through organic growth and acquisitions.

The ratings agency said: “In July 2007, Validus Holdings acquired Talbot Holdings Ltd., which enhanced the business profile of the group by diversifying the company’s revenues to include other lines of business, spreading risk exposures geographically and expanding its distribution channels. This acquisition has served to complement the organic growth of revenues while diversifying Validus Holdings’ exposure and enhancing its business profile.”

A.M. Best concluded: “Validus Holdings has demonstrated its risk management capabilities and prudent risk selection as evidenced by its solid underwriting performance and overall operating results compared to its peers during a very difficult 2008 and 2011. This will increasingly become more challenging as the company grows and develops newer operating platforms and expands its business profile.”

The following debt ratings have been upgraded:

Validus Holdings, Ltd. –

– to “bbb” from “bbb-” on $250 million 8.875% senior unsecured notes, due January 2040

The following indicative ratings for securities available under the shelf registration have been upgraded:

Validus Holdings, Ltd.–

– to “bbb” from “bbb-” on senior unsecured debt

– to “bbb-” from “bb+” on subordinated debt

– to “bb+” from “bb” on preferred stock

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