Zacks_Analysts' Blog : Rating Action on MRH's MUSIC - Analyst Blog

Following the announcement of Montpelier Re U.S. Holdings Ltd., a wholly-owned subsidiary of  Montpelier Re Holdings Ltd. (MRH), to divest Montpelier US Insurance Company (MUSIC), A.M. Best Co. has put the financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of “a-” of MUSIC under review with positive implications.

Earlier, in May, the credit rating agency had revised the outlook to positive from stable.

Recently Montpelier agreed to sell MUSIC, the company’s U.S. excess and surplus lines insurance business to Selective Insurance Group Inc. (SIGI) for a total consideration of $55 million with the transaction expected to close in the fourth quarter of 2011 pending regulatory approvals.

Following the closure of the transaction, MUSIC will be added to Selective’s portfolio. Earlier in May, the credit rating agency had affirmed FSR of A+ (Superior) and ICR of “aa-” of Selective. The outlook was negative.

Montpelier scores high with the rating agencies. In May, A.M. Best Co. reiterated the issuer credit ratings (ICR) of “bbb-” and all existing debt ratings of Montpelier.

The rating agency upgraded the outlook to positive from stable. The affirmations came on the back of Montpelier’s superior risk-adjusted capitalization, strong operating performance, diversified business profile and solid position.

However, Montpelier’s exposure to catastrophe losses is a partial offset to the strength. Based on the company’s financial flexibility, accessibility to equity and debt markets, and continued progress of newer operating platforms, A.M. Best Co. upgraded the rating.

Headquartered in Pembroke, Bermuda, Montpelier, through its subsidiaries in the U.S., the U.K. and Switzerland, provides customized and innovative reinsurance and insurance solutions to the global market. The company competes with Flagstone Reinsurance Holdings SA (FSR), RenaissanceRe Holdings Ltd. (RNR) and Validus Holdings, Ltd. (VR).