|[February 07, 2013]
A.M. Best Affirms Ratings of Validus Reinsurance, Ltd. and Validus Holdings, Ltd.
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating of A
(Excellent) and issuer credit rating (ICR) of "a" of Validus
Reinsurance, Ltd. (Validus Re). Additionally, A.M. Best has affirmed
the ICR of "bbb" and debt ratings of the parent company, Validus
Holdings, Ltd. (Validus Holdings) (both domiciled in Bermuda) [NYSE:
VR]. The outlook for all ratings is stable. (See below for a detailed
listing of debt ratings.)
The ratings reflect Validus Re's solid risk-adjusted capitalization,
favorable operating performance since inception, experienced management
team, excellent enterprise risk management program and prudent operating
strategies. Validus Re's ratings are further supported by Validus
Holdings, which provides financial flexibility as a publicly traded
company on the New York Stock Exchange.
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 mitigating this concern. 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.
Since its formation in the fourth quarter of 2005, Validus Holdings has
grown through organic growth and acquisitions. In July 2007, Validus
Holdings acquired Talbot Holdings Ltd., which enhanced the business
profile of the group by diversifyng 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 also diversifying Validus Holdings'
exposures and enhancing its business profile. In November 2012, Validus
Holdings continued its expansion through the acquisition of Flagstone
Re, which will further enhance its client base and scale.
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 again in 2011. This will increasingly become
more challenging as the company grows and develops newer operating
platforms and expands its business profile.
Rating factors that could lead to a positive outlook or rating upgrades
would be the continuation of Validus Re's long-term, consistently strong
operating profitability relative to its peer group and maintaining
strong risk-adjusted capital levels. The rating factors that could lead
to a negative outlook or rating downgrades include outsized catastrophe
or investment losses relative to the organization's peer group,
unfavorable operating profitability trends and a significant decline in
risk-adjusted capital that would not be supportive of the current rating
The following debt rating has been affirmed:
Validus Holdings, Ltd.-
-- "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 affirmed:
Validus Holdings, Ltd.-
-- "bbb" on senior unsecured debt
-- "bbb-" on subordinated debt
-- "bb+" on preferred stock
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include: "Risk
Management and the Rating Process for Insurance Companies";
"Understanding Universal BCAR"; "Catastrophe Analysis in A.M. Best
Ratings"; "Insurance Holding Company and Debt Ratings"; and "Rating
Members of Insurance Groups." Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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