OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of Validus Reinsurance, Ltd. (Validus Re) (Hamilton, Bermuda). Concurrently, A.M. Best has affirmed the FSRs of A (Excellent) and the Long-Term ICRs of “a” of the following Validus subsidiaries: Western World Insurance Company, Stratford Insurance Company and Tudor Insurance Company (all companies headquartered in Parsippany, NJ). The outlook of the FSRs remains stable, while the outlook of the Long-Term ICRs remains positive. Additionally, A.M. Best has revised the Long-Term ICR outlook to positive from stable and affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Validus Reinsurance (Switzerland) Ltd. (VRS) (Zurich, Switzerland), a subsidiary of Validus Holdings, Ltd. (Validus) (Hamilton, Bermuda) [NYSE:VR]. The outlook of the FSR is stable.
A.M. Best also has affirmed the Long-Term ICR of “bbb” and the Long-Term Issue Credit Ratings (Long-Term IR) of Validus, the ultimate parent company. The outlook of these Credit Ratings (ratings) remains positive. (See below for a detailed listing of the Long-Term IRs.)
Western World Insurance Company, Stratford Insurance Company and Tudor Insurance Company have been extended the ratings of Validus Re in recognition of their strategic importance to the group, the explicit support provided through a material quota share agreement with Validus Re and the implied support of future parental commitment. VRS has been extended the ratings of Validus Re in recognition of its strategic importance, as the platform by which Validus Re has expanded and enhanced its business profile in recent years, as well as the implied support of future parental commitment.
The ratings of Validus Re reflect its strong risk-adjusted capitalization, solid operating performance since inception, experienced management team and excellent enterprise risk management program. The company’s consistently positive operating results demonstrate the capability of producing results that are at the high end of its peer group. Validus Re has the expertise and capacity to write diverse books of business globally and is well-positioned to successfully manage through the competitive market environment. Further supporting the ratings is that the ultimate parent, Validus, can provide financial flexibility as a publicly traded company on the New York Stock Exchange.
Partially offsetting these strengths are Validus Re’s exposure to high-severity events as a property catastrophe-focused reinsurer and the increased competition from capital markets in this space. However, the company’s risk-adjusted capital remains at levels that have been stress tested to absorb significant catastrophe losses mitigating this concern. Additionally, Validus Re has enhanced the business profile of the group by diversifying the company’s revenues to include other lines of business – most recently into the excess and surplus market through Western World Insurance Company – spreading risk exposures geographically and expanding its distribution channels. These actions have increased Validus Re’s client base and scale. Further diversification will be achieved following the announcement of the company’s intended purchase of Crop Risk Services, expected to close in the second quarter of 2017.
The positive Long-Term ICR outlook reflects A.M. Best’s expectation that the group will continue to produce consistent long-term operating results in relation to its peers and maintain excellent risk-adjusted capitalization.
Factors that could lead to a rating upgrade would be the continuation of long-term, consistently strong operating profitability relative to its peer group and maintaining strong risk-adjusted capital levels.
Factors that could lead to an outlook revision or a rating downgrade include outsized underwriting losses relative to its peer group, resulting in a significant decline in risk-adjusted capital that would not be supportive of the current rating levels.
The following Long-Term IR has been affirmed with a positive outlook:
Validus Holdings, Ltd.—
-- “bbb” on $250 million 8.875% senior unsecured notes, due January 2040
The following indicative Long-Term IRs for securities available under the shelf registration have been affirmed with positive outlooks:
Validus Holdings, Ltd.—
-- “bbb” on senior unsecured debt
-- “bbb-” on subordinated debt
-- “bb+” on preferred stock
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.