Best Places Max’s Ratings on Positive Review; Harbor Point Unchanged

A.M. Best Co. has placed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of the operating subsidiaries of Max Capital Group Ltd. under review with positive implications following the recent announcement of its intent to merge with Harbor Point Limited [See IJ web site – https://www.insurancejournal.com/news/international/2010/03/04/107862.htm].

Best also noted that the rating actions apply to Max’s lead operating company, Max Bermuda Ltd, its affiliated operating subsidiaries, the ICR of “bbb-” and all debt ratings of Max. All the above named companies are domiciled in Hamilton, Bermuda.

“The under review status reflects the potential benefits to Max in terms of broadening its management depth, adding strong underwriting teams, improved diversification, increased capacity and greater scale of operations,” Best explained. “At a high level, the new company, which is to be named Alterra Capital Holdings Limited, will have little overlap in terms of lines of business, which makes this a complementary transaction. It is anticipated that the risk-adjusted capital of the combined organization will be strong after considering the proposed post closing extraordinary dividend of approximately $300 million.”

In a separate bulletin Best said that the financial strength rating of ‘A’ (Excellent) and the issuer credit ratings (ICR) of “a” of Harbor Point Re Limited, Harbor Point Reinsurance U.S., Inc. (HPRUS), which is headquartered in Greenwich, Conn., and the ICR of “bbb” of their parent holding company, Bermuda-based Harbor Point Limited “are unaffected by the definitive agreement reached to merge with Max Capital Group Ltd.”

In Best’s opinion, the merger between Harbor Point and MXGL “will enhance the capacity and distribution capability of Harbor Point’s products due to the complementary nature of MXGL’s existing operating platforms. The combined organization will benefit from operating synergies, limited overlap in lines of business and improved diversification.”

The only “offsetting factor” relates to the “execution risk of integrating these two diverse organizations,” said Best. “However, these risks are somewhat mitigated by Harbor Point’s strong management team, which has historically demonstrated solid enterprise risk management fundamentals.”

Best also noted that the “transaction itself is stock for stock and is not contingent upon raising public or private capital. The deal is not expected to close until sometime in second quarter 2010, subject to shareholder and regulatory approvals. The ratings will remain under review until the transaction has closed and A.M. Best has completed its evaluation of the merged entity.”

Source: A.M. Best – www.ambest.com