A.M. Best Affirms Ratings of Alterra Capital Holdings Limited and Its Operating Subsidiaries


A.M. Best Affirms Ratings of Alterra Capital Holdings Limited and Its Operating Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Alterra Bermuda Limited (Alterra Bermuda) and its affiliated operating companies.

Concurrently, A.M. Best has affirmed the ICR of "bbb" of Alterra Bermuda's immediate parent company, Alterra Capital Holdings Limited (Alterra). A.M. Best also has affirmed all debt ratings of Alterra, Alterra USA Holdings Limited, Alterra Finance, LLC (both domiciled in Delaware) and Alterra Capital Trust I. All the above named companies are domiciled in Bermuda, unless otherwise specified. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.) On May 1, 2013, Alterra was acquired by Markel Corporation (Markel) (Glen Allen, VA) [NYSE: MKL], and the integration is ongoing. Both Alterra and Markel are specialty-focused underwriters.

The ratings for the Alterra organization take into consideration its recent change in ownership, the future benefits to be derived from its integration into Markel, as well as some of the immediate benefits gained in terms of enhanced scale, reach, the Markel brand, distribution platform and its leadership position in the excess and surplus lines marketplace in the United States. With integration plans underway, A.M. Best will continue to maintain a dialogue with management to review and discuss Alterra, its future plans and how the Alterra organization will ultimately align with Markel and its existing members. Until that time, the ratings of Alterra are considered as if this were a "bolt-on" acquisition and assume no material changes to business profile, capitalization, performance as well as inter-company reinsurance.

In addition to the new owner, these ratings also reflect Alterra Bermuda's solid financial performance through the second quarter of 2013 and its strong risk-adjusted capitalization. Alterra has platforms and operations in major global underwriting markets, which gives it flexibility to optimize its underwriting portfolio composition. Being part of Markel, revenue and earnings prospects are likely to be enhanced through synergies, the leveraging of existing business relationships and efficiencies gained.

Partially offsetting these positive rating attributes are the current soft market in casualty classes of business, which represents a significant portion of Alterra's risk portfolio and the challenging investment climate that places increased pressure on underwriting profitability.

Rating factors that could lead to a downgrading of the Alterra organization's ratings and/or a revised outlook to negative include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers, significant adverse loss reserve development or a material decline in its risk-adjusted capital. Alternatively, factors that could lead to an upgrading of the ratings include continued favorable operating profitability coupled with maintenance of a strong risk-adjusted capital level and/or explicit or implicit support from Markel that would enhance the capital or profile of the Alterra organization.

The FSR of A (Excellent) and ICRs of "a" have been affirmed for Alterra Bermuda Limited andits following affiliated operating companies:

  • Markel Europe plc

  • Alterra America Insurance Company

  • Alterra Excess and Surplus Insurance Company

  • Alterra Reinsurance USA Inc.

The following debt ratings have been affirmed:

Alterra USA Holdings Limited (guaranteed by Alterra Capital Holdings Limited)

--"bbb" on $100 million 7.2% senior secured notes, due 2017

Alterra Finance, LLC (guaranteed by Alterra Capital Holdings Limited)

--"bbb" on $350 million 6.25% senior unsecured notes, due 2020

The following indicative ratings under the current shelf registration have been affirmed:

Alterra Capital Holdings Limited—

--"bbb" on senior unsecured debt

--"bbb-" on subordinated debt

--"bb+" on preferred stock

Alterra USA Holdings Limited (guaranteed by Alterra Capital Holdings Limited)

--"bbb" on senior secured debt

--"bbb-" on subordinated debt

Alterra Capital Trust I (guaranteed by Alterra Capital Holdings Limited)

--"bb+" on preferred securities

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visitwww.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.


A.M. Best Co.
Greg Reisner
Managing Senior Financial Analyst
908-439-2200, ext. 5224
Robert DeRose
Vice President
908-439-2200, ext. 5453
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644

KEYWORDS: United States Europe North America New Jersey Virginia


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