AM Best: Endurance Ratings Remain Unchanged

April 1, 2015

A.M. Best has commented that the financial strength rating [FSR] of A [Excellent] and the issuer credit ratings [ICR] of “a” of Endurance Specialty Insurance Ltd. and its affiliates remain unchanged following the announcement of the plans to acquire Montpelier Re Holdings Ltd.

Concurrently, A.M. Best has commented that the ICR of “bbb” and debt ratings of Endurance Specialty Holdings, Ltd. remain unchanged. Both companies are domiciled in Bermuda.

A statement from the ratings agency said, “The comment reflects A.M. Best’s need to further evaluate the proposed transaction and its impact on Endurance. Additional discussions with management will take place in order to gain a better understanding of the strategy going forward as a combined company.

“It is anticipated that the merger will achieve synergies, partially through expense reductions and by improving capital efficiencies. The transaction will also provide some geographical and product diversification for Endurance with the addition of a Lloyd’s platform and the management of third party capital.

“It remains uncertain if the combined entity will have the ability to transform itself into a well-diversified, global underwriter capable of generating sufficient long term benefits and the necessary relevance in an increasingly competitive reinsurance market, given that Montpelier was primarily focused on U.S. property catastrophe reinsurance business, which has been under the greatest pricing pressure.

“The challenges in the reinsurance market that must be overcome by the combined organization include continuing rate deterioration, low investment yields and the diminishing benefit of favorable reserve development. Execution risk is another factor to consider with this transaction, although both companies have strong underwriting and risk management capabilities.

“This transaction is subject to the approval of both companies’ shareholders, regulatory approval and the completion of customary closing conditions.”

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